Many Firms Today Continue to Use the Payback Method but Employ

question 68

True/False

Many firms today continue to use the payback method but employ the NPV or IRR methods as secondary decision methods of control for risk.

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Definitions:

Optimal Risky Portfolio

A portfolio that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Expected Return

The average return anticipated on an investment over a given period, accounting for the different rates of return and their probabilities.

Portfolio Variance

A measure of the dispersion of the returns of a portfolio, indicating the level of risk involved.

Correlation Coefficient

A numerical indicator that shows the extent of association between two variables' movements.