The Value Today of All Future Cash Flows Discounted to the Present

question 40

Multiple Choice

The value today of all future cash flows discounted to the present at the investor's required rate of return is called?

• A) going-concern value
• B) present value
• C) terminal value
• D) reversion value
• E) net present value

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Definitions:

Modified Duration

A measure that estimates the price sensitivity of a bond or bond portfolio to interest rate changes, adjusting for the changing yield to maturity.

Convexity

A measure of the curvature or the rate of change of the bond's duration as interest rates change, affecting the bond's price sensitivity to interest rate changes.

Yield

The income generated by an investment, often expressed as a percentage of the investment's cost or market value.

Basis Points

A financial measurement unit representing the percentage shift in the value or rate of a financial asset, which is equal to one hundredth of a percent.