You Are Trying to Compare the Present Values of Two

question 23

Multiple Choice

You are trying to compare the present values of two separate streams of cash flows which have equivalent risks.One stream is expressed in nominal values and the other stream is expressed in real values.You decide to discount the nominal cash flows using a nominal annual rate of 8 percent.What rate should you use to discount the real cash flows?

• A)8 percent
• B)EAR of 8 percent compounded monthly
• C)comparable risk-free rate
• D)comparable real rate
• E)You cannot compare the present values of these two streams of cash flows.

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Definitions:

Morale

The confidence, enthusiasm, and discipline of a person or group at a particular time.

Organization

A structured group of people who come together to achieve common goals, typically through a defined hierarchy and roles.

Self-Sabotage

Behaviors or thought patterns that hinder a person's success or well-being, often done unconsciously.

Procrastination

The action of delaying or postponing tasks despite knowing there will be negative consequences.