Derivative Instruments Exist Because

question 22

Multiple Choice

Derivative instruments exist because

• A) They help shift risk from risk-averse investors to risk-takers.
• B) They help in forming prices.
• C) They have lower investment costs.
• D) Choices a and b
• E) All of the above

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Definitions:

MIRR

Modified Internal Rate of Return, a financial metric that accounts for the cost of capital and assumes positive cash flows are reinvested at a firm's reinvestment rate.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment, calculating the present value of cash inflow minus the present value of cash outflow.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of potential investments based on cash flows.

Project Accepted

A status indicating that a proposed plan or project has been reviewed and granted approval for implementation.