Which of the Following Statements Is False

question 29

Multiple Choice

Which of the following statements is false?

• A) One way to understand why you would sometimes choose not to invest in a positive-NPV project is to think about the decision of when to invest as a choice between two mutually exclusive projects: (1) invest today or (2) wait.
• B) You invest today only when the NPV of investing today exceeds the value of the option of waiting, which from option pricing theory we know to be always positive.
• C) When you do not have the option to wait, it is optimal to invest in any positive-NPV project.
• D) When you have the option of deciding when to invest, it is usually optimal to invest only when the NPV is positive but close to zero.

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Definitions:

Insurance

A financial product that provides protection against potential future losses or damages in exchange for a premium.

Risk Neutral

A condition in which an individual or entity shows indifference between choices that have different levels of risk, focusing solely on potential outcomes regardless of uncertainty.

Expected Level

the anticipated quantity or value in a given context, often based on statistical analysis or previous observations.

Risk Aversion

A preference for options that offer more certainty and less potential for loss.