The use of certainty equivalents means

Name: The use of certainty equivalents means
Brand: Quizplus
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Question

​The use of certainty equivalents means

Quizplus · Accepted Answer

Certainty equivalents are used to convert risky cash inflows into their equivalent certain cash inflow value. It assumes that the investor is risk-averse and will only accept the risky cash inflow if it provides a return equal to or greater than the certain cash inflow value. Therefore, an investment's cash inflows are expressed as if they were certain.

​The Use of Certainty Equivalents Means

The Use of Certainty Equivalents Means