When Calculating the Present Value of an Ordinary Annuity,it Is

question 152

Multiple Choice

When calculating the present value of an ordinary annuity,it is assumed that:

• A) cash flows will be reinvested at the required rate of return.
• B) cash flows occur at the end of each accounting period.
• C) the investor will wait until the end of the investment period to withdraw cash flows.
• D) cash flows will be reinvested at the required rate of return and cash flows occur at the end of each accounting period.

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Definitions:

External Costs

External costs, or negative externalities, are costs that are not borne by the parties directly involved in a transaction or activity but are imposed on third parties or society at large, such as pollution.

Internalized

This term generally refers to the absorption of external effects or costs by the decision-maker, often in the context of environmental economics.

Coase Theorem

An economic theory stating that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights.

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be positive or negative.