You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?

You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?

The discount rate decreases.

The riskiness of the investment's cash flows decreases.

The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years and less are received in the later years.

The cash flows are in the form of a deferred annuity, and they total to $$100,000.$ You learn that the annuity lasts for only $5$ rather than $10$ years, hence that each payment is for $$20,000$ rather than for $$10,000.$

The discount rate increases.

Question at position $13$

$13$

$2$ points

Question at position $13$

Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?

Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?

Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually. Deposits in Bank B will provide the higher future value if you leave your funds on deposit.

If an investment pays $10\%$ interest, compounded annually, its effective annual rate will be less than $10\%.$

A bank loan's nominal interest rate will always be equal to or less than its effective annual rate.

A $30-$year, $$150,000$ amortized mortgage will have larger monthly payments than an otherwise similar $20-$year mortgage.

The present value of a $5-$year, $$250$ annuity due will be lower than the PV of a similar ordinary annuity.