Which One of the Following Statements Would Generally Be Considered

question 66

Multiple Choice

 Which one of the following statements would generally be considered as accurate given independent projects with conventional cash flows?

• A) The internal rate of return decision may contradict the net present value decision. 
• B) Business practice dictates that independent projects should have three distinct accept indicators before a project is actually implemented. 
• C) The payback decision rule could override the net present value decision rule should cash availability be limited. 
• D) The profitability index rule cannot be applied in this situation. 
• E) The projects cannot be accepted unless the average accounting return decision ruling is positive. 

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Definitions:

Put Option

A financial contract allowing the holder to sell a specific amount of an underlying asset at a predetermined price within a specified time frame.

Hedge Ratio

A ratio used to calculate the amount of derivatives needed to hedge a position or portfolio, often used to minimize risk exposure.

Delta

A measure in financial markets that compares the change in the price of a derivative to the change in the price of its underlying asset.

Gamma

A measure of the rate of change in an option's delta for a one-unit change in the price of the underlying asset.