If the Net Present Value for a Project Is Positive

question 49

Multiple Choice

If the net present value for a project is positive, which of the following is true?

• A) the project should be accepted because its expected rate of return is greater than the cost of capital
• B) its internal rate of return is more than its cost of capital
• C) its expected rate of return is below the required rate of return
• D) its internal rate of return is less than its cost of capital

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Definitions:

Yield To Call

The yield to call is the return an investor would receive if they held a bond until its call date, when the issuer has the option to repay the bond before its maturity date at a specified price.

Nominal Yield

The yearly interest income from a bond or fixed-income security, expressed as a percentage of the bond's face value.

Semiannually

Occurring twice a year, typically every six months.

Call Price

The price at which a bond or other security can be repurchased by the issuer before its maturity date, usually at a premium to the face value.