1.

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? Question content area bottom Part 1

A. The present value of cash flows in Investment A is equal to 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 higher than 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.

2.

If the risk-free rate of interest

(rf)

is 6%, then you should be indifferent between receiving $250 today or

A.

$256.00 in one year.

B.

$250.00 in one year.

C.

$235.85 in one year.

D.

$244.00 in one year.

E.

$265.00 in one year.