In Theory, the Risk-Free Rate Is More Appropriate for the NPV

question 18

Multiple Choice

In theory, the risk-free rate is more appropriate for the NPV calculation in the certainty equivalent approach since:

• A)it is assumed that there is no business-specific risk associated with the projects.
• B)certainty equivalent factors cannot take negative values.
• C)certainty equivalents imply zero risk.
• D)certainty equivalents consider unsystematic risk only.

---

Definitions:

School Phobia

Unrealistic fear of going to school; may be a form of separation anxiety disorder or social phobia.

Fearful

Characterized by fear; feeling dread or apprehension about a possible event or situation.

Behavior Therapy

A type of psychotherapy that focuses on changing specific behaviors and uses various techniques to stop undesirable habits or behaviors.

Learning Theory

A framework that describes how individuals acquire, retain, and recall knowledge and skills.