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.

---

Definitions:

Chronic Alcoholism

A medical condition characterized by an uncontrollable need to consume alcohol despite the negative effects it has on one’s health and life.

Neurological Disorder

A disorder that affects the nervous system, including the brain, spinal cord, and nerves.

Emotional Functioning

Refers to the capacity to process and appropriately express one's emotions in various situations, including the ability to regulate emotions and empathize with others.

Alzheimer's Disease

A progressive neurological disorder that causes memory loss, cognitive decline, and eventually leads to death.