24 The likely effect of discounting nominal cash flows with real interest rates will be to: A make an investment's NPV appear less attractive. B make an investment's NPV appear more attractive. C correctly calculate an investment's NPV, regardless of expected inflation. D. correctly calculate an investment's NPV if inflation is expected.

Q: Investors require a _____ return as compensation for taking ____ risk. A) higher, margin B)…

A: Risk is the possibility that the actual return on any investment made might be different from the…

Q: An inflation hedge is an asset that increases in value at a rate equal to or greater than the rate…

A: Hedging is technique of reducing risk. This reduction in risk also results typically in a decrease…

Q: Using a payback period rule tends to bias investors toward Select one: a. riskier investments. b.…

A: Payback period: This method is used to calculate how many years a project will take to recover its…

Q: 1. Lower duration means higher interest rates risk (inverse relationship). Select one: True False

A:

Q: Problem 3: Investments X and Y both offer the same expected rate of return. The standard deviation…

A: When making investment decisions, it's crucial to consider various factors such as expected returns,…

Q: Consider the monetary policy rule under financial frictions. If f >0 the prevailing market real the…

A: Consider the monetary policy rule under financial frictions.

Q: If the expected rate of return for the market is not much greater than the risk-free rate of return,…

A: If the expected rate of return for the market is not much greater than the risk-free rate of return,…

Q: Diversification is good:   Select one: a. To increase the net financial cash flows of your…

A: Introduction : In simple words, diversification refers to the practice in which the investor invest…

Q: nt is more​ liquid, the return you receive will

A: Liquid investments are those investments that can be easily sold for cash.

Q: Which of the following is NOT true? In risk-neutral valuation the risk-free rate is used to discount…

A: Risk-neutral valuation produces a valuation that is correct in all situations not just those where…

Q: TRUE / FALSE The discount rate used to discount the value of future dollars can generally be…

A: The present value of an investment is the value of all future cash flows that have been discounted…

Q: Which of the following is a true statement regarding the future worth of a single investment…

A: Introduction: This question is related to the concept of time value of money. The time value of…

Q: With a decrease in time preference, the supply of loanable funds will increase.   Select one: True…

A: Loanable funds includes all forms of credit, such as loans, bonds, or savings deposits. There is an…

Q: A disadvantage of using the payback period to compare investmentalternatives is that it;

A: Payback period: The payback period is the time period required to recover the initial investment of…

Q: What is financial market equilibrium? And then explain its relation to required rate of return.

A: Financial market equilibrium: Financial market equilibrium is a condition in which money supply…

Q: cash flow frequ ot the same, one W oved: the period

A: Period interest rate approach : In simple words, the period interest rate approach refers to the…

Q: Reinvest risk is lowest during a period of low-interest rates. Is this true or false? Explain.

A: Reinvestment Risk is the risk that an investor will not be able to reinvest the income received on…

Q: K possible Risk-Free Rate. What is a risk-free rate? Give an example of an investment with a risk…

A: Please refer below page.If you have any questions feel free to ask.Explanation:

Q: Which of the following is not a discounted technique Select one: a. Net present value b. Discounted…

A: Discounted technique is a technique to determine the present value of future cash flows.

Q: According to the CAPM, the expected return of an asset that has just diversifiable risk and no…

A: As per CAPM,  Expected Return = Rf + ( Beta * (Rm -Rf)) Rf = Risk free rate of return Rm = Market…

Q: The hypothesis holds that future price movements are unpredictable: O A. rational expectations OB.…

A: Price movement refers to the shift in the price of any asset or security. It is caused due to many…

Q: The market risk premium is computed by: subtracting the risk-free rate of return from the market…

A: The Market Risk Premium (MRP) is a key concept in finance that helps investors and analysts…

Q: 4.32 Investment risk analysis. The risk of a portfolio of financial assets is sometimes called…

A: Expected loss with a probability distributon is calculated using the below formula: Expected…

Q: Provide intuition for the asset pricing equation: Pt = Et (Mt+1Xt+1) where M is the stochastic…

A: The Asset Pricing Program investigates the variables that affect the costs and yields of financial…

Q: ch of the folowing models CANNT be applied to measure the Value-at-Risk of a cash-flow portfolio?…

A: VaR is the value at risk that how much money of the portfolio is at risk and how much money…

Q: 3. The beta for the risk-free investment is closest to: A) 1. B) 0. C) Unable to answer this…

A: Beta is a measure of systematic risk which cannot be eliminated through diversification.  In other…

Q: Which of the following is TRUE about liquidity? a. All assets should be put in liquid asset so that…

A: The simplicity with which an asset, or security, might  be changed into immediate cash without…

Q: 23. The certainty equivalent rate of a portfolio is  a. the rate that a risk free investment would…

A: The certainty equivalent rate of a portfolio means the assured rate of the return that an investor…

Q: An increase in investor risk aversion would be expected to:   Increase the Risk-Free Rate while…

A: We have to assess the impact of an increase in investor risk aversion on risk free rate and the…

Q: Let rf be the risk free rate of interest. E[r e ] be the expected return of some risky asset.…

A: CAPM: CAPM is also called as Capital assets pricing model. Factors affecting CAPM return are risk…

Q: How can investors make decisions about financial instruments that involve future payoffs? a) There…

A: Future payoff refers to the expected future return on financial instruments. Every financial…

Q: increased change in value that occurs because longer maturity investments are affected more by…

A: Bonds are a source of investment for investors and bonds are paid an annual coupon and par value is…

Q: Choose option a,b,c,d,e for the following: Question 6 - A higher financial risk: a. Arises when…

A: Financial risk is concerned with the company's ability to generate sufficient cashflows.

Q: The present value of a future amount: a. will always be less than the future amount b. can be…

A: Present value = Future value / (1+i)^twherei = discount ratet = number of periods

Q: Explain your answer assuming that all variables are constant except for the one mentioned:

A: Capital budgeting is a method used for finding the profitability of investment proposals. This…

Q: The market risk premium:   Decreases with the risk aversion of investors in the market…

A: The market risk premium is the additional return that investors demand over and above the risk-free…

Q: All else equal, as market interest rates fall, the present value of a future cash flow. the…

A: Present value is the equivalent today based on time value of money of the future cash flow that is…

Q: Can the actual real rate of interest be negative? When ? Can the expected real rate be negative?

A: Yes, the actual real interest rate can be negative. This can happen when the actual inflation rate…

Q: The discounting of the future is assumed to be exponential. What does behavioral finance have to say…

A: Answer and explanation are given below

Q: Speculation tends to have a high risk and high rate of return compared to investment Select one: O…

A: The main target in both the cases are making profit, however there are major differences between the…

Q: At a minimum, which of the following would you need to know to estimate the amount of additional…

A: A risk-free commodity is one that has a guaranteed future return and almost no chance of declining…

Q: Is it true that the the wider the risk premium, the lower the price of a expected future cash flow?

A: Risk premium is the return the stock gives over the risk free asset. risk premium = Rs-Rf Wider risk…

Q: The lower the discount rate used: Select one: A. the bigger the present value of future cash flows…

A: Step 1:The payback duration for a traditional project is always less than the discounted payback…

Q: Market risk embodies the following risks except: O a. Financial. O b. Interest rate. Tax. O d.…

A: Market risk is a undiversified risk which cannot be controlled. It is a systematic risk that affects…

Q: Which of the following statements describing the elements of intrinsic valuation is most accurate?…

A: Intrinsic value of any project or any assets is how value being added by asset to value of investors…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.