When Calculating the Present Value of Either a Future Single

question 107

Multiple Choice

When calculating the present value of either a future single sum or a future annuity, the applicable interest rate is usually called the

• A)yield to maturity.
• B)compound interest rate.
• C)internal rate of return.
• D)discount rate.

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Definitions:

Well-Organized Markets

Financial markets characterized by high levels of efficiency, transparency, liquidity, and regulation, facilitating fair and orderly trading and pricing of securities.

Efficient Markets

A hypothesis suggesting that financial markets are "informationally efficient," meaning prices of securities reflect all available information at any moment.

Expected Risk Premium

The extra return investors require to hold a risky asset over a risk-free asset, reflecting the additional risk.