If You Are Discounting a Project's Cash Flows Using the Nominal

question 30

Multiple Choice

If you are discounting a project's cash flows using the nominal cost of capital, then that means that you have taken the following into account:

• A) the real rate of return
• B) the expected rate of inflation
• C) both of the above
• D) none of the above

---

Definitions:

Debt Obligation

A commitment to repay borrowed money, typically in the form of loans or bonds, with specific terms and interest rates.

Treasury Inflation-Protected Securities (TIPS)

Government bonds whose principal value is adjusted based on changes in the inflation rate, protecting investors from inflation.

Consumer Price Index

An index that measures changes in the price level of a market basket of consumer goods and services purchased by households, often used as a measure of inflation.