Which of the Following Statements About Project Risk Analysis in Not-For-Profit

question 2

Multiple Choice

Which of the following statements about project risk analysis in not-for-profit firms is incorrect?

• A) A project's corporate beta measures the contribution of the project to the overall corporate risk of the firm.
• B) A project's corporate beta is found (at least conceptually) by regressing returns on the project against returns on the market portfolio.
• C) A project's corporate beta is defined as (σ_P/σ_F)r_PF, where σ_P is the standard deviation of the project's returns, σ_F is the standard deviation of the firm's returns, and r_PF is the correlation among the two sets of returns.
• D) In practice, it is usually difficult, if not impossible, to directly measure a project's corporate risk, so project risk analysis typically focuses on stand-alone risk.
• E) The market risk of a project is not relevant to not-for-profit firms.

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Definitions:

Exchange Rate

The value of one currency for the purpose of conversion to another, indicating how much one currency is worth in terms of another.

Supply and Demand

Economic model that determines the price of a commodity in a market, based on the availability of the commodity (supply) and the desire for it (demand).

Francs

A former currency unit used in France and several other countries before the adoption of the euro, also still used in some parts of Switzerland and Liechtenstein.

Exchange Rate

The exchange rate is the price at which one currency can be exchanged for another, affecting imports, exports, and international investments.