Author Question: If a project's only risk is diversifiable, A) only half the risk premium should be added to the ... (Read 74 times)

809779 · **on:** Jul 1, 2018

If a project's only risk is diversifiable,

A) only half the risk premium should be added to the discount rate.
B) only half the risk premium should be subtracted from the discount rate.
C) the risk premium should be added to the discount rate.
D) the risk premium should be subtracted from the discount rate.
E) no risk premium should be attached to the discount rate.

Question 2

Which scenario below would lead to lower profits as we double the inputs used by the firm?

A) Increasing returns to scale with constant input prices
B) Constant returns to scale with constant input prices
C) Constant returns to scale with rising input prices (perhaps because the firm is not a price-taker in the input markets)
D) all of the above