If One Project Has a Higher Standard Deviation Than Another

question 6

Multiple Choice

If one project has a higher standard deviation than another

• A) it has a greater risk.
• B) it has a higher expected value.
• C) it has more possible outcomes.
• D) it may be riskier, but this can only be determined by the coefficient of variation.

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Definitions:

Discount Rate

The Discount Rate represents the interest rate applied to calculate the present value of future cash flows within discounted cash flow analysis.

Present Value

The worth as of today of a future money sum or cash flow series, taking into consideration a specific rate of return.

Present Values

This is a concept in finance that calculates the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Discount Rate

This rate is applied in the framework of DCF analysis for the purpose of calculating the current value of foreseeable cash flows.