D. increased collateral
E. nonrecourse protection
The process of determining the present value of future cash flows in order to know their
worth today is called which one of the following?
A. compound interest valuation
B. interest on interest computation
C. discounted cash flow valuation
D. present value interest factoring
E. complex factoring
Last year, you purchased a stock at a price of $47.10 a share. Over the course of the
year, you received $2.40 per share in dividends while inflation averaged 3.4 percent.
Today, you sold your shares for $49.50 a share. What is your approximate real rate of
return on this investment?
A. 6.30 percent
B. 6.79 percent
C. 7.18 percent
D. 9.69 percent
E. 10.19 percent
Amy has been investing in stocks so she can accumulate sufficient money to purchase
her own home. These savings are currently valued at $82,500. As recently as last
month, her savings were worth in excess of $110,000. Today, Amy found the perfect
house. She knows she can withdraw her savings to pay on this house and borrow the
remaining balance from her father at zero percent interest. However, Amy is refusing
now to buy any house until her savings increase in value back to their $110,000
previous valuation. Amy is displaying which one of the following behaviors?