A. The amount of interest expected to be generated each year
B. The time horizon – how long the investment is expected to be held in the portfolio

C. The interest rate to be used for discounting the annual payments to be received

D. The amount needed at the end of the holding period

Answer: D

to calculate net present value, the discount rate, cash flows and time horizon are all required. The amount desired at the end of the period is not part of the equation.

  1. Do plane tickets get cheaper closer to the date of departure?

    The price of flights usually increases one month prior to the date of departure. Flights are usually cheapest between three ... Read Full Answer >>
  2. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  3. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  4. What are some of the more common types of regressions investors can use?

    The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >>
  5. What types of assets lower portfolio variance?

    Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >>
  6. When is it better to use systematic over simple random sampling?

    Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Using Decision Trees In Finance

    A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.
  2. Economics

    Understanding Tragedy of the Commons

    The tragedy of the commons describes an economic problem in which individuals try to reap the greatest benefits from a given resource.
  3. Fundamental Analysis

    Return on Investment (ROI) Vs. Internal Rate of Return (IRR)

    Read about the similarities and differences between an investment's internal rate of return (IRR) and its return on investment (ROI).
  4. Economics

    Current Probability of Donald Trump as President

    Predict the current odds of a Donald Trump presidency, and understand the factors that have kept him on top and the looming challenges he faces.
  5. Investing Basics

    Understanding the Random Walk Theory

    The random walk theory states stock prices are independent of other factors, so their past movements cannot predict their future.
  6. Investing Basics

    A Simplified Approach To Calculating Volatility

    Volatility is sometimes greater than anticipated, but the way it’s measured can compound the problems that occur when it’s unexpected.
  7. Investing Basics

    Why Blue Chip Stocks Are Key to Buy-and Hold Investing

    Several blue chip stocks have proven that buy-and-hold investing still works, even after the huge declines of the Great Recession.
  8. Mutual Funds & ETFs

    Are Your ETFs Too Risky? Learn How to Evaluate Them

    Learn how to identify ETFs with greater risk and volatility. See why some investors include higher volatility ETFs in pursuit of greater returns.
  9. Economics

    Calculating the Arithmetic Mean

    The arithmetic mean is the average of a sum of numbers.
  10. Term

    What's Skewness?

    Skewness describes how a data distribution leans.
  1. Contagion

    The spread of market changes or disturbances from one region ...
  2. Rule Of 72

    A shortcut to estimate the number of years required to double ...
  3. Metrics

    A wide variety of tools that managers and executives can use ...
  4. Qualitative Analysis

    Securities analysis that uses subjective judgment based on nonquantifiable ...
  5. Alpha

    Alpha is used in finance to represent two things: 1. a measure ...
  6. Linear Relationship

    A statistical term used to describe the directly proportional ...

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center