If the Risk-Free Rate of Interest (R_f)is 5%, Then You

question 25

Multiple Choice

If the risk-free rate of interest (r_f) is 5%, then you should be indifferent between receiving $300 today or

• A)$315.00 in one year.
• B)$350.00 in one year.
• C)$285.00 in one year.
• D)none of the above.

---

Definitions:

Investment Objectives

Define the financial goals and strategies of an investor or an investment fund.

Risk

The potential for loss or unfavorable outcomes in any given situation, often assessed in finance as the variability of returns on investments.

Return

Return refers to the gain or loss on an investment over a specific period, including income received and the change in value, usually expressed as a percentage of the investment’s initial cost.

Investment Horizon

Time horizon for purposes of investment decisions.