Multiple Choice
You are given two choices of investments,Investment A and Investment B.Both investments have the same future cash flows.Investment A has a discount rate of 4%,and Investment B has a discount rate of 5%.Which of the following is TRUE?
A) The present value of cash flows in Investment A is higher than the present value of cash flows in Investment B.
B) The present value of cash flows in Investment A is lower than the present value of cash flows in Investment B.
C) The present value of cash flows in Investment A is equal to the present value of cash flows in Investment B.
D) The present value of cash flows in Investment A is half the present value of cash flows in Investment B.
E) No comparison can be made - we need to know the cash flows to calculate the present value.
Correct Answer:
Verified
Correct Answer:
Verified
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