Respuesta :
The desired rate of return uses compound interest because it assumes all the cash inflows are reinvested at the same rate that is option B is correct.
Compound Interest is the method in which the investor lend some money to the borrower at a certain rate known as interest rate and for a certain period of time known as interest period. The amount can be compounded annually, semi-annually, monthly, weekly and on a daily basis. The most important feature of compound interest is that the amount earned after a certain compounding period becomes the principle for the next compounding period that is the amount is reinvested at the same rate of interest. Thus, the investor is always in profit while compounding the money as compound interest as it gets increased and there are no chances of loss.
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Complete Question:
The desired rate of return uses compound interest because
A. compounding is required by federal law
B. it assumes all cash inflows are reinvested at the same rate
C. it is easier than using simple interest
D. compound interest is more accurate
