An Asset Whose Value Is Based on the Value of Another

question 40

Multiple Choice

An asset whose value is based on the value of another asset is called a:

• A) derivative.
• B) dividend.
• C) stock.
• D) bond.

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Definitions:

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

Cost of Capital

The profit rate that an organization must reach in its investment operations to keep its market status and draw financial resources.

Cash Inflows

The total amount of money being transferred into a business, typically measured over a specific period of time.

Cost of Capital

The compulsory return rate businesses need on investment plans to sustain their market position and attract monetary contributions.