The appropriate discount rate used in decision tree methodology

Question

Quizplus · Accepted Answer

The appropriate discount rate used in decision tree methodology should be risk-adjusted and risk may vary by period and decision node. This is because the decision tree approach takes into account the potential uncertainties and risks associated with each decision, and it is important to adjust the discount rate accordingly to reflect the level of risk. Additionally, as the risk may vary by period and decision node, it is important to consider these factors when determining the appropriate discount rate to use.

The Appropriate Discount Rate Used in Decision Tree Methodology