Question

21. Following is (are) the method(s) for adjustment of risks
a) Risk-adjusted Discounting Rate
c) both
b) Risk Equivalence Coefficient Method
d) none​

Answer 1

Explanation:

risk equivalence coefficient method/both

Answer 2

Risk-adjusted Discounting Rate and Risk Equivalence Coefficient Method are the method for adjustment of risks

Explanation:

• When investing in a project with a high level of risk, there is an opportunity cost.
• Risk adjustment is required to determine whether the project's rewards are commensurate to the risks taken and whether it is worthwhile to invest in the project over the other investment options available.
• To determine the true value of the Cash Inflows, risk adjustment is required. Higher risk entails a higher risk premium and, as a result, a higher expected return.
• The certainty-equivalent approach is typically based on the certainty of returns and, as a result, the likelihood of an investment's outcome.
• When it comes to determining an investor's risk tolerance, the concept of certainty-equivalent comes in handy.
• It is widely utilised by risk-averse investors who do not want to expose their assets to higher levels of risk.