Reference no: EM133227538

Question 1. Why do we apply a discount rate when completing a net present value calculation?

a) Because a dollar in the future is worth more than a dollar today, so we must discount future cash flows to the present

b) Only to adjust for the effects of inflation

c) To take into consideration the discount that we estimate an investment is currently priced at

d) To determine the present value of future cash flows, based on the expected annual rate of return

Question 2. Which of the following is least accurate about the total return of a portfolio?

a) It requires a benchmark to be used meaningfully.

b) Total return does not require the Sharpe ratio in order to be computed.

c) Total return is calculated as capital gain divided by initial purchase price.

d) It can theoretically reflect unrealized capital gains if the stocks haven't been sold when the calculation is performed.