When the Costs of an Investment Come Before That Investment's

question 42

Multiple Choice

When the costs of an investment come before that investment's benefits,what will be the the effect of a rise in interest rates on the attractiveness of that investment to potential investors?

• A)It will make it more attractive,since it will increase the investment's net present value (NPV).
• B)It will make it more attractive,since it will decrease the investment's net present value (NPV).
• C)It will make it less attractive,since it will increase the investment's net present value (NPV).
• D)It will make it less attractive,since it will decrease the investment's net present value (NPV).

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Definitions:

Specific Price

This term refers to the exact price of a particular item or security at a specified time.

Put Option

A put option is a financial contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Call Option

An agreement in finance which allows the purchaser to have the option, but not the commitment, to purchase a certain amount of a specific asset at a pre-agreed price during a fixed period.

Specified Price

A predetermined price set in a contract or agreement, often related to sales or financial instruments.