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You are given two choices of investments Investment A and Investment B Both investments have the same future cash flows Investment A has a discount rate of 4% and Investment B has a discount rate

You are given two choices of investments, Investment A and Investment B. Both investments have the same future cash flows. Investment A has a discount rate of 4%, and Investment B has a discount rate of 5%. Which of the following is true?

   

The present value of cash flows in Investment A is higher than the present value of cash flows in Investment B.

   

The present value of cash flows in Investment A is lower than the present value of cash flows in Investment B.

   

The present value of cash flows in Investment A is equal to the present value of cash flows in Investment B.

   

No comparison can be made - we need to know the cash flows to calculate the present value.

 

May 14 2020 View more View Less

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