Consider the following two statements concerning risk analysis: 1. Sensitivity analysis provides clear decision rules concerning acceptance or rejection of an investment project. 2. The risk-adjusted discount rate adds a risk premium to the expected rate of inflation to deri a discount rate for investment projects. Which one of the following combinations (true/false) relating to the above statements is correct? O a. Statement 1 True Statement 2 False O b. none of the answer provided are correct Statement 2 True O c. Statement 1 True O d. Statement 1 False Statement 1 False Statement 2 False e. Statement 2 True

In choosing where to invest, return and risk for an investment must be compared. It is not sufficient to choose an investment based only on return without taking risk into consideration. There are two methods or measures that compare return and risk. State these two methods, the formula for each and the criteria used in evaluating alternative investment of each method.

Which of the following statements correctly describe aspects of the diversification benefit associated with combining two assets into a portfolio? Group of answer choices A. When the returns of the two assets are perfectly positively correlated, a zero-risk portfolio can be formed. B. In order to achieve any diversification benefit, the returns of the two assets must be negatively correlated. C. More than one of the other statements is correct. D. Holding all else constant, as the correlation coefficient between the returns of the two assets falls, the risk of the portfolio will also be reduced.

To obtain the maximum reduction in risk, an investor should combine assets that * A.are negatively correlated. B.have a correlation coefficient of negative one. C.are uncorrelated. Option 5 D.have a correlation coefficient of positive one.

Forecasting risk can be defined as the possibility that _____ will lead to incorrect decisions. a. the inclusion of opportunity costs b. erosion c. errors in projected cash flows d. the exclusion of sunk costs e. net working capital costs

Which of the following is false about diversification? Select one or more: a. diversification increases Sharpe ratios  b. diversification eliminates risk c. diversification increases returns d. diversification increases alpha

What does risk tolerance measure in the context of investment strategy? This is a multiple choice question. Once you have selected an option, select the submit button below The ability to take on higher risks for potentially higher returns The willingness to accept losses in the short term The capacity to afford potential losses The preference for low-risk, low-return investments