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

question 7

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 equal to the present value of cash flows in Investment B.
• C)The present value of cash flows in Investment A is lower than 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:

Reference Groups

Groups that individuals compare themselves to for self-evaluation or as a source of personal standards.

Group Unanimity

The state or condition of complete agreement or consensus among all members of a group, often contributing to stronger group cohesion and decision-making.

Cultural Pressures

The influence exerted by society on individuals to adhere to societal norms and values.

Influencer

A person who can influence others' buying choices because of their expertise, status, relationship with the audience, or authoritative position.