(Appendix 12A)The Nominal Method Is Preferred to the Real Method

question 36

Multiple Choice

(Appendix 12A) The nominal method is preferred to the real method for NPV analysis because:
I. Cash flows can be inflated at different rates
II. It includes a risk premium
III. It includes the risk-free rate

• A)I only
• B)I and II only
• C)II only
• D)II and III only

Comprehend the role and calculation of probabilities in relation to the distribution of sample means and proportions.

Relate simulation outcomes to probability estimations for both discrete and continuous random variables.

Recognize the significance of the Central Limit Theorem in shaping sample distribution models.

Determine the feasibility of applying the Normal model under various conditions in real-world scenarios.

---

Definitions:

Interest

Payment made for the use of borrowed money, calculated as a percentage of the principal sum.

Simple Interest

Interest calculated only on the initial amount of money (principal), not on the interest accrued over time.

Investment

Allocation of resources, such as time, money, or effort, in hope of generating a future benefit or return.

Interest Rate

The interest percentage applied on the sum of money borrowed by an individual from a financial lender.