Which of the Following Is NOT True

question 19

Multiple Choice

Which of the following is NOT true?

• A) Risk-neutral valuation provides prices that are only correct in a world where investors are risk-neutral
• B) Options can be valued based on the assumption that investors are risk neutral
• C) In risk-neutral valuation the expected return on all investment assets is set equal to the risk-free rate
• D) In risk-neutral valuation the risk-free rate is used to discount expected cash flows

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Definitions:

Uncontrollably

Acting or occurring without being able to be controlled or restrained, often used to describe emotions or physical responses.

Drive-Reduction Theory

A theory of motivation proposing that the primary motivation of all organisms is to reduce their drives, such as hunger, thirst, or the need for warmth.

Stimulus Motive Theory

The concept that behavior is motivated by a desire to increase stimulation in order to maintain an optimal level of arousal.

Evolutionary Theory

A scientific theory that explains how species change over time through mechanisms like natural selection and genetic variation.