When the Discount Rate

question 7

Multiple Choice

When the discount rate:

• A) increases, the present value of a future cash flow decreases.
• B) increases, the present value of a future cash flow increases.
• C) decreases, the present value of a future cash flow will remain the same.
• D) decreases, the present value of a future cash flow decreases.

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Definitions:

Normal Distribution

A bell-shaped probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence.

Mean

The average value of a set of numbers, calculated by dividing the sum of all values by the number of values.

Standard Normal Deviate

Another term for Z-score, highlighting its role in standard normal distribution.

Standard Deviation

Standard deviation is a measure used in statistics to quantify the amount of variation or dispersion of a set of values.