IMANET Exam CMA Topic 1 Question 109 Discussion

Actual exam question for IMANET's CMA exam

Question #: 109
Topic #: 1

[All CMA Questions]

The discount rate ordinal' used in present value calculations is the

AFederal Reserve rate

BTreasury bill rate.

CMinimum desired rate of return set by the firm.

DPrime rate.

Show Suggested Answer

Suggested Answer: B

If the 8% return exactly equals the present value of the future flows ., NPV is zero), then simply determine the present value of the future inflows. Thus, Hopkins Company's initial cash outlay is $19,090 [($2,500)(PVIFA at 8% for 10 periods) + ($5J00)(PVlF at 8% for 10 periods ($2,500)(6.710) + ($5,000)(.463)].

by Lina at Mar 23, 2025, 06:53 PM

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Tayna

1 months ago

If the discount rate was the Prime rate, I'd be discounting my future earnings at the same rate as my credit card. Not very realistic, is it?

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Ettie

13 days ago

B) Treasury bill rate

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Olen

14 days ago

A) Federal Reserve rate

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Glory

2 months ago

The Federal Reserve rate? What is this, a trick question? That's the interest rate the Fed uses, not what businesses use for their own investments.

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Ronald

8 days ago

B) Treasury bill rate.

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Lauran

13 days ago

C) Minimum desired rate of return set by the firm.

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Jordan

25 days ago

A) Federal Reserve rate

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Nydia

2 months ago

The prime rate? Really? That's for commercial loans, not for discounting future cash flows. C is the way to go.

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Lera

5 days ago

The Federal Reserve rate and Treasury bill rate are also not typically used as the discount rate in present value calculations.

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Daryl

10 days ago

Yeah, the prime rate is not typically used for discounting future cash flows.

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Antonette

23 days ago

I agree, the minimum desired rate of return set by the firm is the discount rate used in present value calculations.

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Roslyn

2 months ago

I think the Treasury bill rate is the right answer here. It's a common proxy for the risk-free rate used in present value calculations.

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Erick

14 days ago

I'm not sure, but I think the Prime rate could also be a possible answer.

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Salome

15 days ago

I believe it's the Federal Reserve rate that is used in present value calculations.

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Tequila

2 months ago

I think it might actually be the minimum desired rate of return set by the firm.

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Barbra

2 months ago

I agree, the Treasury bill rate is commonly used as the risk-free rate.

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Kerry

2 months ago

The discount rate is definitely the minimum desired rate of return set by the firm. That's what we've been learning in our finance classes.

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Elliot

2 months ago

Yes, that's correct. It's an important concept in finance.

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Roosevelt

2 months ago

I agree, the discount rate is the minimum desired rate of return set by the firm.

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Edwin

2 months ago

That makes sense, the firm's desired rate of return would be more relevant for present value calculations.

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Lacresha

3 months ago

I disagree, I believe it is the Minimum desired rate of return set by the firm.

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Edwin

3 months ago

I think the discount rate ordinal used in present value calculations is the Treasury bill rate.

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