The Higher the Risk Element in a Project, the

question 118

Multiple Choice

The higher the risk element in a project, the

• A) more attractive the investment.
• B) higher the net present value.
• C) higher the cost of capital.
• D) higher the discount rate.

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Definitions:

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuer's equity shares at certain times during the bond's life, usually at the discretion of the bondholder.

Carrying Value

The book value of assets and liabilities on a company's balance sheet, calculated as the original cost minus any depreciation, amortization, or impairment costs.

Equity Accounts

Equity accounts represent the owner's value in a business, reflected through transactions like contributed capital and retained earnings.

Sinking Fund Bonds

Bonds that include a provision requiring the issuer to set aside funds regularly to repay the bond at maturity.