The Present Value of Future Cash Flows Are Computed by Multiplying

question 72

Multiple Choice

The present value of future cash flows are computed by multiplying future value with the:

• A) discounting factor.
• B) compound factor.
• C) interest rate.
• D) number of periods.

---

Definitions:

Convertible Bonds

Convertible bonds are securities that can be turned into a specified amount of equity in the company that issued them, typically at the choice of the person holding the bond, during specific periods of their duration.

Straight-Debt Yield

The return an investor can expect to earn if they hold a bond to maturity without the issuer defaulting, typically not including the effects of callability.

Exchange Ratio

The ratio at which one company’s shares will be exchanged for another in the event of a merger or acquisition.

Current Price

The market value of an asset or security at a specific point in time.