Joe tells his high school friends that right after he graduates he will definite
ID: 1190614 • Letter: J
Question
Joe tells his high school friends that right after he graduates he will definitely go to medical school, do internship, then do more schooling as he specializes in radiology. Joe most likely has __________ discount factor and ___________ discount rate.
Answers:
a.
high; high
b.
high; low
c.
low; high
d.
low; low
Joe tells his high school friends that right after he graduates he will definitely go to medical school, do internship, then do more schooling as he specializes in radiology. Joe most likely has __________ discount factor and ___________ discount rate.
Answers:
a.
high; high
b.
high; low
c.
low; high
d.
low; low
Explanation / Answer
Answer is (b) high ; low
Explanation ; As joe is planning to go for higher studies in a row, it proves he has good amount of money now and in future either by loan or by himself. So dicount factor is high, as Discount factor is a ratio to find present value of future cash flows.
And also he has low discout rate as Discount rate is The interest rate charged by the Federal Reserve on loans to its member banks. A change in this rate is viewed as a strong indicator of Fed policy with respect to future changes in the money supply and market interest rates. Generally, a rise in the discount rate signals increasing interest rates in the money and capital markets.
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