Question

The value of a financial asset is the​ ________.

A. present value of just the capital gains but not the dividends
B. present value of all of the future cash flows that will be received
C. future value of just the capital gains but not the dividends
D. sum of all previous cash flows received

Answer 1

Answer: The correct answer is "B. present value of all of the future cash flows that will be received".

Explanation: The value of a financial asset is the​ present value of all of the future cash flows that will be received.

To value a financial asset, all future cash flows must be taken into account, therefore their value will be the sum of the present values of each of the future cash flows.