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Question 5.A.13: Can you think what the practical problems with this approach...

Can you think what the practical problems with this approach might be?

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Subjective judgement is required when assigning an investment project to a particular risk category and then in assigning a risk premium to each category. The choices made will reflect the personal views of the managers responsible and these may differ from the views of the shareholders they represent. Nevertheless, the choices made can make the difference between accepting and rejecting a particular project.

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