If the Risk of an Investment Project Is Different Than

question 11

Multiple Choice

If the risk of an investment project is different than the firm's risk then:

• A) you must adjust the discount rate for the project based on the firm's risk.
• B) you must adjust the discount rate for the project based on the project risk.
• C) you must exercise risk aversion and use the market rate.
• D) an average rate across prior projects is acceptable because estimates contain errors.
• E) one must have the actual data to determine any differences in the calculations.

Understand the hypothesis testing in correlation and regression analysis.

Grasp the concept and implications of residual analysis in regression.

Recognize the significance of the coefficient of determination in regression models.

Calculate and interpret confidence intervals and prediction intervals in regression.