Which three statements accurately describe the process of allowing for risk by raising or lowering the discount rate?
A) It is easy to understand.
B) It is an accurate, objective approach.
C) It is an easy approach to use.
D) It is susceptible to subjectivity in risk premium and risk class allocation.

Question

Quizplus · Accepted Answer

Raising or lowering the discount rate to account for risk is easy to understand and use, but it is subjective because it involves estimating risk premiums and classifying risks, which can vary between evaluators.

Which Three Statements Accurately Describe the Process of Allowing for Risk