The Financial Manager Selecting One of Two Projects of Differing

question 157

Multiple Choice

The financial manager selecting one of two projects of differing risk should

• A) select the project with the larger risk-adjusted net present value.
• B) choose the project with the least relative risk.
• C) choose the project with greater return even if that project has greater risk.
• D) choose the project with less risk even though that project has less return.

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Definitions:

Linear Trend

A consistent upward or downward slope in a dataset, indicating an increase or decrease in the variable over time.

Exponential Trend

A pattern of data that showcases growth or decay at a constantly increasing rate, often represented graphically as a curved line.

Autoregressive(2)

A type of statistical model used in time series analysis in which a variable's current value is predicted from its own previous values, using two time-lags.

Second-order Autoregressive Model

A stochastic process where the current value is based on a linear combination of the two immediately prior values plus an error term.