To take into account greater risk in investment decision-making the discount rate must be

Question

Quizplus · Accepted Answer

A higher discount rate reflects a greater perceived risk and therefore requires a higher rate of return on the investment to compensate for that risk. Lowering the discount rate would imply that the investment is less risky, which may not necessarily be the case. A fixed rate approach would not take into account the level of risk associated with the investment. Therefore, option B is the best choice.

To Take into Account Greater Risk in Investment Decision-Making the Discount