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

question 99

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)The present value of cash flows in Investment A is half the present value of cash flows in Investment B.
• E)No comparison can be made - we need to know the cash flows to calculate the present value.

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Definitions:

Seasonal Discount

A price reduction offered on products or services during certain times of the year when demand is predictably lower or higher.

Underpricing

The practice of setting the price of a product or service lower than the market value or cost, often to attract customers or gain market share.

Shrinkflation

A phenomenon where products are sold at the same price but have reduced quantity or quality, often unnoticed by the consumer.

Bid Site

An online platform where businesses or individuals can post jobs or projects, and service providers can place bids to win the work.