The theoretical basis from which the concept of risk-adjusted discount rates is derived is ________.
A) the Gordon model
B) the capital asset pricing model
C) simulation theory
D) the basic cost of money

Question

Quizplus · Accepted Answer

The concept of risk-adjusted discount rates is derived from the capital asset pricing model (CAPM), which explains the relationship between risk and return for individual securities. CAPM is widely used in finance and investment to determine the appropriate discount rate for investments with differing levels of risk.

The Theoretical Basis from Which the Concept of Risk-Adjusted Discount