1. The process of taking cash flow that is received or paid in the future and stating that cash flow in present value terms is called discounting.

True

False

2. The nominal rate of interest on a bond is 8% and the expected inflation premium is 4%. This results in an approximate real rate of interest of 4% on the bond.

True

False

3. Upward-sloping yield curves result from higher future inflation expectations, lender preferences for shorter maturity loans, and greater supply of short-term as opposed to long-term loans relative to their respective demand.

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False

4. The free cash flow valuation model can be used to determine the value of an entire company as the present value of its expected free cash flows discounted at the firm's weighted average cost of capital.

True

False