You Are Given Two Choices of Investments, Investment a and Investment

question 27

Multiple Choice

You are given two choices of investments, Investment A and Investment B. Both investments have the same future cash flows. Investment A has a discount rate of 4%, and Investment B has a discount rate of 5%. Which of the following is true?

• A) The present value of cash flows in Investment A is higher than the present value of cash flows in Investment B.
• B) The present value of cash flows in Investment A is lower than the present value of cash flows in Investment B.
• C) The present value of cash flows in Investment A is equal to the present value of cash flows in Investment B.
• D) No comparison can be made-we need to know the cash flows to calculate the present value.

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Definitions:

Bandura's Classic

Refers to Albert Bandura's classic social learning theory, which posits that people learn behaviors, attitudes, and emotional reactions through social observation and imitation.

Aggressively

In a manner that is forceful, assertive, or intent on dominating or achieving one's goals, sometimes implying a readiness to confront or attack.

Negative Reinforcement

A behavior modification technique that involves the removal of an unpleasant stimulus to increase the likelihood of a desired behavior being repeated.

Extinction

In behavioral psychology, the process where a conditioned response decreases in frequency and eventually disappears when the stimulus is no longer presented.