In cash flow estimation and risk analysis, real rate will be equal to nominal rate if there is__________?
Correct answer: A. No inflation
- A. No inflation
- B. High inflation
- C. No transactions
- D. No acceleration
Explanation
Inflation creates the difference between nominal and real rates. When inflation is zero, the nominal and real rates are equal, assuming the same risk and timing assumptions.
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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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