An interest rate which is used in calculation of cash flows of bonds is called______________?
Correct answer: C. Required rate of return
- A. Required rate of redemption
- B. Required rate of earning
- C. Required rate of return
- D. Required option
Explanation
The required rate of return is the discount rate used to calculate the present value of a bond’s future coupon payments and principal. It reflects the return investors require for the bond’s risk.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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