A $35 investment produces $38.50 at the end of the year with no risk.Which of the following is true?
A)NPV is positive if the interest rate is less than 10%.
B)NPV is negative if the interest rate is less than 10%.
C)NPV is zero if the interest rate is equal to 10%.
D)Both A and C.
E)None of the above.

Question

Quizplus · Accepted Answer

The NPV is positive if the interest rate is less than 10% and zero if the interest rate is exactly 10%, as the investment grows from $35 to $38.50, which is a 10% increase.

A $35 Investment Produces $38