Which of the Following Adjustment Techniques Would Be Preferred to Account

question 14

Multiple Choice

Which of the following adjustment techniques would be preferred to account for additional project risk?

• A)increase the discount rate.
• B)adjust expected cash flows downward.
• C)increase the beta.
• D)adjust the market risk premium.

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Definitions:

Fully-Funded Pension Funds

Pension plans that have sufficient assets to meet all the pension obligations to participants, both present and anticipated.

Inflation Hedge

An investment that is considered to protect against the decrease in purchasing power due to inflation.

Variable Life Insurance

A type of life insurance where the cash value and death benefit can vary based on the performance of a set of chosen investments.

Tax-Deferred Annuity

A financial product that allows for the investment of pre-tax dollars, where the taxes on earnings are deferred until withdrawal.