As the Degree of Sensitivity of a Project to a Single

question 9

Multiple Choice

As the degree of sensitivity of a project to a single variable rises,the:

• A)less important the variable to the final outcome of the project.
• B)less volatile the project's net present value to that variable.
• C)greater the importance of accurately predicting the value of that variable.
• D)greater the sensitivity of the project to the other variable inputs.
• E)less volatile the project's outcome.

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Definitions:

Required Reserves

The minimum amount of reserves a bank must hold as mandated by regulatory authorities, based on a percentage of the bank's deposit liabilities.

Demand Deposits

Bank accounts from which money can be withdrawn at any time without any notice to the bank.

Original Maturity

The original length of time until a financial instrument, such as a bond or loan, is due to be repaid in full.

Required Reserves

The minimum amount of reserves a bank needs to hold as mandated by central banks to ensure financial stability and liquidity.