Using the risk adjusted discount rate approach

Reference no: EM1356262

1. Which investment has the least amount of risk?
a) Coefficient of variation =11%, expected return = $800
b) Coefficient of variation =11%, Standard deviation = $200
c) Standard deviation = $500, expected return = $5,000
d) Standard deviation = $100, expected return = $80

2. Using the risk-adjusted discount rate approach, projects with high coefficients of variation will have __________ net present values than projects with low coefficients of variation. (Points: 5)
a) somewhat higher
b) substantially higher
c) lower
d) Either A or B

3. Using the risk-adjusted discount rate approach, the cost of capital is applied to projects with: (Points: 5)
a) normal risk
b) high risk.
c) no risk.
d) low risk.

4. Using the risk-adjusted discount rate approach, the firm's weighted average cost of capital is applied to projects with:
a) no risk.
b) low risk.
c) normal risk.
d) high risk.

Reference no: EM1356262

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