If the Risk of an Investment Project Is Different Than

question 18

Multiple Choice

If the risk of an investment project is different than the firm's risk then:

• A) you must calculate the discount rate for the project based on the firm's risk.
• B) you must calculate the discount rate for the project based on the project risk.
• C) you must exercise risk aversion and use the market rate.
• D) an average rate across prior projects is acceptable because estimates contain errors.

---

Definitions:

Constitutional Monarchies

Systems of government in which a monarch acts as head of state within the parameters of a constitution, sharing power with elected bodies or operating within a framework that limits their powers.

Disenfranchised

Individuals or groups that are deprived of the right to vote or other rights of citizenship.

Voting Rights

The entitlements of citizens to participate in the election of government officials and to influence governance through the democratic process.

Society Transmits Knowledge

The process through which societies pass on knowledge, values, and traditions from one generation to the next, often via institutions, family, and education.