The Present Value (PV) of an Investment Is ________

question 109

Multiple Choice

The present value (PV) of an investment is ________.

• A) the amount that an investment would yield if the benefit were realized today
• B) the difference between the cost of the investment and the benefit of the investment in dollars today
• C) the amount you need to invest at the current interest rate to re-create the cash flow from the investment
• D) the amount by which the cash flow of an investment exceeds or falls short of the cash flow generated by the same amount of money invested at market rate

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Definitions:

Optimistic Estimate

An estimate that assumes the most favorable conditions and outcomes for a project or investment.

Bid Shading

A strategy in which buyers deliberately bid lower than their actual valuation of the item to save costs, common in auction contexts.

Common Value Auctions

Auctions in which the item for sale has a value that is the same for all bidders, but the bidders have different information about that value.

True Value

The accurate, fair, or intrinsic worth or importance of something.