Suppose That You Have Computed the Historical Average Forward Rate

question 20

Multiple Choice

Suppose that you have computed the historical average forward rate variance with weekly data.To convert this to an annual variance,use the following adjustment:

• A) Variance (Annual)= Variance (Weekly)* 12
• B) Variance (Annual)= Variance (Weekly)* 52
• C) Variance (Annual)= Variance (Weekly)* 250
• D) Variance (Annual)=Variance (Weekly)*260
• E) None of these answers are correct.

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Definitions:

Future Cash Inflows

Projected future earnings or receipts in cash form, anticipated from investments, operations, or financing.

Cash Outflows

Money paid out by a business for its operational and investment activities.

Straight-Line Depreciation

A method of calculating the depreciation of an asset which assumes the asset will lose an equal amount of value each year over its useful life.

Payback Period

The amount of time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment.