A security's value is equal to the present value of its expected future cash flows discounted by an appropriate rate of return.

Question

Quizplus · Accepted Answer

This statement is the basic principle of valuation in finance. The value of a security is derived from the present value of its expected future cash flows, which are discounted by a rate of return that reflects the level of risk associated with the investment.

A Security's Value Is Equal to the Present Value of Its