Question

> Quality Core Scantron Performa Cullman School Wo... SS SSCC Two-Year A DRC GHMS 2017-18 Ed. 2016 Revised Alab V IZIO 39 lew Questions (ch. 6, 7, 8) Subed 92.6/100 Total points awarded Hele You are trying to compare the present values of two separate streams of cash flows that have equivalent risks one stream is expressed in nominal values and the other stream is expressed in real values. You decide to discount the nominal cash flows using a nominal annual rate of 8 percent What rate should you use to discount the real cash flows? Multiple Choice O 8 percent EAR of 8 percent compounded monthly Comparable risk-free rate O Comparable real rate < Prey 17 of 27 1 Next >

Answer 1

We need to use comparable real rate to discount real cash flows thus the correct answer will be last option i.e., comparable real rate.