In Investment Models,a Useful Approach for Generating Future Returns and Inflation

question 32

Multiple Choice

In investment models,a useful approach for generating future returns and inflation factors from historical data is:

• A) the NPV approach
• B) the scenario approach
• C) the averaging approach
• D) the trend analysis approach
• E) None of these options

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Definitions:

Compound Rate

The rate of interest used in calculating compound interest, typically applied over multiple compounding periods.

Investment

The allocation of resources, usually money, in the expectation of generating an income or profit.

Compounded Semiannually

Interest that is computed and appended to the original amount semi-annually.

Effective Rate

The actual interest rate that an individual earns or pays on an investment, loan, or other financial product, after compounding and other factors are taken into account.