The discounted payback rule will give the same result as the NPV rule when the cut-off rule is infinite the discount rate is the same they will never give the same result the cut-off rule is zero
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- Internal Rate of Return is the discount rate that sets NPV to 0. True or false?which of the following is true? a lower payment amount results in a higher FV, other things equal. A higher interest rate results in a higher FV, other things equal. A lower N results in a higher FV, other things equal Less frequent compounding results in a higher FV, other things equal A lower PV results in a higher FV, other things equal.The NPV profile: O A. shows the payback period the point at which NPV is positive. O B. shows the internal rate of return the point at which NPV is zero. OC. shows the NPV over a range of discount rates. O D. B and C are correct.
- True or False. Please Justify.The discount function [a(t)]^−1 is generally a decreasing function of time.What happens, when greater the interest rate other things being equal? a) The higher the NPV b) The lower the NPV c) The higher the PV d) None of the statements are correct.The break-even value calculation is similar to the calculation we use for theinternal rate of return. True or false?
- a) what is the discounted payback period? b) what is the NPV? c)What is the IRR? note: please you dont use excel.Which one of the following statements is correct?a. If NPV is positive, IRR will be less than required rate of returnb. If NPV = 0, IRR is equal to the required rate of returnc. If NPV is positive, IRR is equal to the required rate of returnd. If NPV is negative, IRR will be greater than the required rate of returne. None of the aboveTriangular arbitrage is not a truly an arbritrage opportunity since the actual cross rate could change at any moment in such a way that the return an arbitrageur would receive becomes zero. True False
- d) Use a numerical example to illustrate that when there is a large change in the interest rate, the approximation error by using the duration and convexity rule is smaller than the approximation error by using the duration rule only.4 When using the Black Scholes method, does volatility affect the price of puts and calls in the same or opposite direction?As the discount rate increases A. present value factors decrease B. Present value factors remain constant C. it is impossible to tell what happens to the factors D. present value factors increase