Which Is NOT Considered a Shortcoming of the Parent Simply

question 52

Multiple Choice

Which is NOT considered a shortcoming of the parent simply adjusting discount rates to account for the additional risk that stems from a project's foreign location?

• A) Cash flows are already highly subjective.
• B) Two-sided risk in that foreign currency may appreciate or depreciate.
• C) Increased sales volume might offset the lower value of a local currency.
• D) These are all shortcomings associated with discount rate adjustment.

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Definitions:

Relative Mispricing

The situation where the price of an asset does not reflect its underlying value when compared to another asset, creating an opportunity for arbitrage.

Market Neutral

A hedged portfolio with no net exposure to market movements.

Nondirectional

Trading strategies not dependent on the market's direction, aiming to profit regardless of whether prices are rising or falling.

Directional

In investing, this term refers to strategies or trades based on the anticipated direction of the market or an asset's price movement.