IRR Calculations Are Biased Because They Assume That Intra- Project

question 36

Multiple Choice

IRR calculations are biased because they assume that intra- project cash flows can be invested at a particular rate of return. What is that particular rate?

• A) IRR
• B) Bank rate
• C) The real rate of return
• D) Discounted bank rate

---

Definitions:

Fundamental Attribution Error

This refers to the tendency of individuals to overemphasize personality traits and underestimate situational factors when explaining another's behavior.

Actor-Observer Effect

A social psychology phenomenon where individuals attribute their own actions to situational factors but the actions of others to their personalities.

Situational Attributions

The process of attributing someone's behavior to external factors, such as situational influences or environmental conditions, as opposed to personal characteristics.

Causal Attributions

Explanations of an individual’s behavior.