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.

---

Definitions:

Price Ceiling

A government-imposed limit on how high the price of a product can be charged in the market, usually to protect consumers.

Legal Minimum

A legally established lower boundary on the price at which a good or service can be sold in the market.

Market Price

The contemporary price point at which goods or services can be transacted in a trading space.

Rent-Control Laws

Regulations that limit the amount landlords can charge for leasing residential properties to ensure affordability.