An Investor Has the Opportunity to Buy a $10,000 Government

question 105

Multiple Choice

An investor has the opportunity to buy a $10,000 government bond which is guaranteed to yield 6.5% interest in one year's time. The investor decides to make the investment as there is a net difference between the absolute cost and benefit. Which of the following is NOT a reason that the investor's decision may be flawed?

• A) It does not consider the current market interest rate.
• B) It does not consider the fact that though costs are incurred today, the benefits occur in one year's time.
• C) It does not consider the value of the $10,000 in one year's time if invested elsewhere.
• D) It does not consider whether the $10,000 will be needed elsewhere.

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