In which of the following situations would it not be appropriate to use the following formula: PV = C₀ + C₁/(1 + r)+ C₂/(1 + r)² + . . . . + C_n/(1 + r)ⁿ When determining the present value (PV)of a cash flow stream? A)when yield curves are flat B)when short-term and long-term interest rates vary widely C)when the inflation rate is high D)when the discount rate is high

Question

Quizplus · Accepted Answer

The formula assumes a constant discount rate (r) over time, which is not appropriate when short-term and long-term interest rates vary widely.

In Which of the Following Situations Would It Not Be