Which of the Following Statements Is FALSE

question 64

Multiple Choice

Which of the following statements is FALSE?

• A)Interest rates we observe in the market will vary based on quoting conventions, the term of investment, and risk.
• B)The opportunity cost of capital is the return the investor forgoes when the investor takes on a new investment.
• C)For a risk-free project, the opportunity cost of capital will typically be greater than the interest rate on Australian government securities with a similar term.
• D)The investor's opportunity cost of capital is the best available expected return offered in the market on an investment of comparable risk and term of the cash flows being discounted.

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Definitions:

Present Value

The now value of a future financial amount or series of cash flows, discounted at a particular rate of return.

Future Value

The value of an investment at a future date, considering compound interest or returns over time.

Amortized Loans

Loans that are paid off over time through a series of fixed, regular payments where part of each payment covers the interest expense and the remaining amount reduces the principal balance.

Balloon Payment

A large, one-time payment made at the end of a loan term to pay off the remaining balance, typically used in mortgage or bond agreements.