question archive Assume that the annual discount rate is 10%
Assume that the annual discount rate is 10%
Subject:FinancePrice:2.86 Bought3
Assume that the annual discount rate is 10%. Which of the two statements A and B is correct? NB: you think the two statements are correct, you should answer C if you think the two statements are not correct you should answer D. A - It is equivalent to receive a cash flow of 1000 € today and a cash flow of 1100 € in one year. B - It is equivalent to receive a cash flow of 1 100 000 € in one year and a cash flow of 1 610 510 € in five years. OC - Both statements are correct. D - None of these two statements are correct.
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Correct answer is A
Received cash flow today=€1000 is equivalent to cash flow of €1100.
Because when €1100 is duscounted with 10% its value Became €1000.
While option B is not correct because after discounting with five year cashflow does not match with 1 st year.
