You Are Given Two Choices of Investments, Investment a and Investment

question 27

Multiple Choice

You are given two choices of investments, Investment A and Investment B. Both investments have the same future cash flows. Investment A has a discount rate of 4%, and Investment B has a discount rate of 5%. Which of the following is true?

• A) The present value of cash flows in Investment A is higher than the present value of cash flows in Investment B.
• B) The present value of cash flows in Investment A is lower than the present value of cash flows in Investment B.
• C) The present value of cash flows in Investment A is equal to the present value of cash flows in Investment B.
• D) No comparison can be made-we need to know the cash flows to calculate the present value.

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Definitions:

Holden Caulfield

The fictional protagonist of J.D. Salinger's novel "The Catcher in the Rye," known for his critical outlook on society and struggle with the concept of adulthood.

Soviet Union

A former federal socialist state in Eastern Europe and Northern Asia, existing from 1922 to 1991, known for its communist form of government.

Business Firms

Organizations involved in commercial, industrial, or professional activities, typically designed to provide goods or services to consumers.

Foreigners

This term refers to individuals or entities that are from a country different from the one in question, often used in the context of economics to discuss foreign investors or workers.