Inflation
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Questions and Answers

How does inflation impact investment decision making?

  • It reduces the real return on investment (correct)
  • It increases the real return on investment
  • It has no impact on investment decision making
  • It decreases the tax liabilities on investment

    • What effect do taxes have on investment decision making?

  • Lower taxes decrease the real return on investment
  • Taxes have no impact on investment decision making
  • Higher taxes increase the real return on investment
  • Higher taxes reduce the after-tax return on investment (correct)

    • How does investment analysis consider the impact of inflation and taxes?

  • It ignores the impact of tax and inflation on investment decisions
  • It solely focuses on pre-tax returns
  • It adjusts return expectations based on tax and inflation rates (correct)
  • It only considers the impact of inflation

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