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.

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Definitions:

Family Court

A specialized court dealing with cases that pertain to family matters such as divorce, child custody, and adoption.

Surrogate Court

A specialized court that deals with matters of probate and administration of estates.

Specific Performance

A legal remedy where a court orders a party to fulfill their obligations under a contract, rather than simply paying damages.

Supreme Court of Canada

The highest court in Canada, which serves as the final appellate court and decides on issues of national importance.