The Main Difference Between the Intuitive Lowest-Cost Method and the Northwest-Corner

question 64

Multiple Choice

The main difference between the intuitive lowest-cost method and the Northwest-corner rule is that

• A) the intuitive lowest-cost method always generates a better solution.
• B) the Northwest-corner rule is faster.
• C) the Northwest-corner rule ignores cost.
• D) only the intuitive lowest-cost method generates an optimal solution.
• E) intuitive lowest-cost method is more accurate.

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Definitions:

Market Risk

The risk of losses due to factors that affect an entire market or asset class, also known as systematic risk, which cannot be eliminated through diversification.

Interest Rate Risk

The potential for investment losses resulting from changes in interest rates.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks; it is used to determine a theoretically appropriate required rate of return of an asset.

Specific Risk

Risk associated with individual investments or a small group of assets, distinct from market risk.