If a Risky Cash Flow of $10,000 Is Equivalent to a Riskless

question 5

Multiple Choice

If a risky cash flow of $10,000 is equivalent to a riskless cash flow of $9,300,the certainty equivalent factor is

• A)0)93.
• B)0)07.
• C)1)07.
• D)1)93.

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Definitions:

Desired Rate

Typically refers to a target or optimal interest rate, return on investment, or growth rate that an individual or organization aims to achieve.

Present Value Index

A financial metric used to calculate the present value of all cash inflows and outflows associated with an investment, compared to its initial cost.

Net Present Value

A financial metric that calculates the value of a project or investment by discounting all expected future cash flows to the present using a particular rate of return.

Net Present Value

The variance between the net present value of incoming cash and outgoing cash within a set timeframe.