Final answer:
Yield capitalization is a method used to convert future benefits into present value. It is used widely beyond finance, by businesses making investments, governments assessing infrastructure projects, and in academic debates on environmental policies. The correct option is a.
Step-by-step explanation:
Yield capitalization is defined as: a) A method used to convert future benefits into present value by discounting each future benefit at an appropriate yield rate. When considering yield capitalization, it's important to recognize its applications in various contexts.
It is not just a financial tool but plays a significant role in other areas such as government and environmental policy. For instance, when a business contemplates a capital investment, it compares the present costs of the investment to the present discounted value of the future benefits that include both financial gains and intangible benefits.
Governments also use this concept when evaluating projects like highway improvements, weighing the immediate financial outlay against the long-term advantages for the community.
The determination of yield capitalization involves selecting an interest rate that reflects the opportunity cost of capital and may include a risk premium. The correct option is a.