Risk-Neutral Probabilities Are Known by Other Names as Well: ________

question 22

Multiple Choice

Risk-neutral probabilities are known by other names as well: ________.

• A) martingale prices
• B) state prices
• C) state-contingent prices
• D) all the above

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Definitions:

NPVGO

Net Present Value of Growth Opportunities; a valuation method that calculates the present value of investment opportunities a company is expected to undertake in the future.

Above Average P/E Multiple

A valuation metric indicating that a company's current share price is higher relative to its per-share earnings than the industry or overall market average.

Risk-adjusted Equity Cost

A method of determining the cost of equity capital that incorporates the risk associated with the equity investment.

Price Earnings Ratio

A valuation metric that compares a company's share price to its per-share earnings, used to evaluate if a stock is over or under-valued.