The higher the ________ interest rate,the greater is the value of a real option.
A)risk-free
B)risk-adjusted
C)risk-linked
D)risk-mandated

Question

Quizplus · Accepted Answer

The higher the risk-free interest rate, the greater is the value of a real option. This is because real options represent the right, but not the obligation, to make decisions under uncertainty. A higher risk-free interest rate reduces the present value of future cash flows, increasing the value of waiting to exercise a real option.

The Higher the ________ Interest Rate,the Greater Is the Value