Which of the Following Statements Is Correct

question 134

Multiple Choice

Which of the following statements is correct?

• A) Neither "stand-alone" nor "within-firm" risk takes account of diversification,either by stockholders or by the firm.
• B) If a project's expected returns are highly correlated with returns on the market,this will tend to reduce the project's market risk.
• C) Monte Carlo simulation analysis and sensitivity analysis are similar,but sensitivity analysis is generally harder to use because it requires knowledge of the probability distributions associated with the input variables.
• D) Sensitivity analysis requires a project's beta coefficient,which can be obtained by either the "pure play" or the "accounting beta" method.
• E) If we are choosing between two mutually exclusive projects which have only costs (no revenues),the riskier one should be evaluated with a lower required rate of return.

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Definitions:

Cognitive Development

The process by which a person's ability to think, reason, and problem solve grows and changes over time.

Abductive Reasoning

A form of logical inference that starts with an observation then seeks to find the simplest and most likely explanation.

Deductive Reasoning

Reasoning from a general statement, premise, or principle, through logical steps, to figure out (deduce) specifics. Also called top-down reasoning.

Digital Natives

Individuals who have been exposed to digital technology from a young age, often considered fluent in the use of computers, the internet, and digital devices.