Author Question: If the risk adjusted discount rate method and the certainty equivalent methods are to give the same ... (Read 94 times)

jasdeep_brar · **on:** Jul 1, 2018

If the risk adjusted discount rate method and the certainty equivalent methods are to give the same results, then the certainty equivalent factor (at) must equal (where rf is the risk-free interest rate, and k is the risk adjusted cost of capi

) A) (1 + rf)t times (1 + k)t.
B) (1 + k)t divided by (1 + rf)t.
C) (1 + rf)t divided by (1 + k)t.
D) (1 + k)t minus (1 + rf)t.

Question 2

Your U.S.-based company is selling parts to a company in Chile and the company will pay you 9.8 million pesos in 3 months. The current exchange rate is 490 pesos/US. If the exchange rate at the time of payment is 510 pesos/US

A) you earn additional profit.
B) the Chilean company will end up paying more for the goods.
C) the Chilean company will end up paying less for the goods.
D) you earn less profit.