Which of the Following Statements Is CORRECT

question 81

Multiple Choice

Which of the following statements is CORRECT?

• A) If two projects are mutually exclusive, then they are likely to have multiple IRRs.
• B) If a project is independent, then it cannot have multiple IRRs.
• C) Multiple IRRs can occur only if the signs of the cash flows change more than once.
• D) If a project has two IRRs, then the smaller one is the one that is most relevant, and it should be accepted and relied upon.
• E) For a project to have more than one IRR, then both IRRs must be greater than the cost of capital.

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Definitions:

Large-cap Indexes

Large-cap Indexes track the performance of stocks from companies with large market capitalization, reflecting the overall health and trends of major corporations.

Nasdaq Composite

An index of all the stocks and similar investments listed on the Nasdaq stock market, often used as a benchmark for technology and biotech securities.

Modified Duration

A measure of the sensitivity of the price of a bond or a bond portfolio to a change in interest rates, adjusted for the possibility that the bond may be called before maturity.

Basis Point

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, equivalent to 0.01%.