Through the interest rate used in NPV or IRR calculations

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Reference no: EM132073531

1. It is important to understand that business-specific (unsystematic) risk is not included in the capital asset pricing model, because beta measures only market (systematic) risk. The underlying assumption is that:

a. we don't need to worry about business-specific risk in portfolios because it's diversified away.

b. we can't measure business-specific risk so it's useless to worry about it.

c. business-specific risk is usually small compared with market risk.

d. All of the above

2. When incorporating risk into capital budgeting through the interest rate used in NPV or IRR calculations, the rates used are called:

a. market risk premium. b. risk-adjusted rates. c. inflation adjusted rates. d. risk-free rates.

Reference no: EM132073531

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