If the Inflation Rate Was Positive the Expected NPV of an Investment

question 44

Multiple Choice

If the inflation rate was positive the expected NPV of an investment would be:

• A) understated if real cash flows were discounted by the nominal discount rate.
• B) understated if nominal cash flows were discounted by the nominal discount rate.
• C) overstated if the real cash flows were discounted by the nominal discount rate.
• D) understated if the nominal cash flows were discounted by the real discount rate.
• E) overstated if the real cash flows are discounted by the real discount rate.

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Definitions:

Abraham Maslow

A psychologist known for creating Maslow's hierarchy of needs, a theory in psychology regarding human motivation based on a pyramid of needs.

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