In Netting Cash Flow Across Time,the Scenario That Assumes That

question 28

Multiple Choice

In netting cash flow across time,the scenario that assumes that the interest rate is zero:

• A)is not a valid scenario for estimating currency risk.
• B)is valid because interest rates generally do not affect cash flow.
• C)underestimates the currency risk involved in the situation being analyzed.
• D)is easy to use,but only makes sense where the interest rate does not affect the estimation of the currency risk.

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Definitions:

Economic Analysis

The systematic approach to determining the optimal use of scarce resources, involving comparison of costs and benefits.

Land Rent

The payment made for the use of land or real estate.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource or input.

Usury Laws

Legislation enacted to place a limit on the interest rate that can be charged on loans, intended to protect borrowers from excessively high rates.