If a Company Selects Either of Project 1 or Project $\le$

question 49

Multiple Choice

If a company selects either of Project 1 or Project 2 (or both) , then either Project 3 or Project 4 (or both) must also be selected. Which of the following constraints enforce this condition?

• A)X₁ + X₂ \(\le\) 2(X₃ + X₄)
• B)X₁ + X₂ \(\le\)X₃ + X₄
• C)X₁ -X₃ = X₂ - X₄
• D)X₁ + X₂ + X₃ + X₄ \(\le\) 2

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Definitions:

Portfolio Duration

A measure of the sensitivity of a portfolio's value to changes in interest rates, often used for managing the interest rate risk.

Interest Rates

The expense associated with obtaining a loan, or the incentive for depositing funds, usually shown as a percentage of the original amount.

Zero-Coupon Bond

A bond that does not pay periodic interest payments but is issued at a deep discount from the face value and is redeemed at the face value at maturity.

Duration

A measure of the sensitivity of the price of a financial asset or liability to changes in interest rates, often used with bonds to assess interest rate risk.