Question

The discount rate that is used for calculating the present values of a project's cash flows...

The discount rate that is used for calculating the present values of a project's cash flows is the rate of return on other investments, which have lower risk than that of the project.

True

False

Diversification helps the investor to significantly reduce the standard deviation of their investment as they create a portfolio by allocating their investment to different securities.

True

False

Variance of an investment's returns shows the exact percentage of the investment's risk.

True

False

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Answer #1

1) the discount rate that is used for calculating the present value of project's future cash flows is the rate of return on alternate investments which have an almost same risk factor to that of the project

So the statement is false

2) Diversification helps in reducing the total risk or the standard deviation of the portfolio

So the above statement is true

3) Standard deviation is a more accurate measurement of the percentage of total riak

So the above statement is false

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