A Project That Requires a $ 100,000 Investment Yields $50,000

question 91

Multiple Choice

A project that requires a $ 100,000 investment yields $50,000 in 6 months and $50,000 in one year should be rejected for the following reasons:

• A) I only
• B) II only
• C) I and II
• D) None of these reasons
• I.The cost of time is not incorporated in the calculation
• II.The sum of the cash inflows following the investment is equivalent to the initial investment

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Definitions:

Contract Rate

The agreed-upon rate or price specified in a contract for the provision of goods or services.

Effective Rate

The actual interest rate realized on an investment, taking into account the effect of compounding over a given time period.

Bond Premium

The surplus value of a bond beyond its principal amount when sold in the market.

Term Bond

Bonds that have a specified maturity date on which the principal or face value is payable to bondholders.