The Certainty Equivalent Approach Is a Risk Evaluation Technique

question 19

Multiple Choice

The certainty equivalent approach is a risk evaluation technique. Which of the following statements is (are) correct?
I. Certainty equivalents adjust the cash flows in the numerator of the NPV equation.
II. Using the RADR involves adjustments to the denominator of the NPV equation.

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements I and II are correct.
• D) Neither statement I nor II is correct.

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Definitions:

Voice Recorder

A device or application used for recording audio, commonly used for taking verbal notes or capturing sounds.

Kinesthetic Learner

An individual who learns best through physical activity, using bodily movements to explore and acquire knowledge.

Right-Brain Dominant

Refers to individuals who are thought to be more intuitive, creative, and subjective, based on the theory of left-brain or right-brain dominance.

Attentive Listening

A decision to be fully focused with the intent of understanding the speaker.