If a Project's Only Risk Is Diversifiable

question 24

Multiple Choice

If a project's only risk is diversifiable,

• A) only half the risk premium should be added to the discount rate.
• B) only half the risk premium should be subtracted from the discount rate.
• C) the risk premium should be added to the discount rate.
• D) the risk premium should be subtracted from the discount rate.
• E) no risk premium should be attached to the discount rate.

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Definitions:

Dread

An intense feeling of fear or apprehension about something that is perceived as threatening or dangerous.

Contingency

An upcoming occurrence or situation that may happen but whose certainty cannot be guaranteed.

Classical Conditioning

Classical conditioning is a learning process where a biologically potent stimulus is paired with a previously neutral stimulus, resulting in a learned response to the neutral stimulus.

US

A country located in North America, known officially as the United States of America, characterized by a federal republic governmental structure.