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Why 'reaction' isn't suitable here? What's "structural value"?



 
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The auxiliary verb "have" and the past (-ed) participle | Idiom: 'let your hair down'
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Why 'reaction' isn't suitable here? What's "structural value"? #1 (permalink) Sun Nov 19, 2006 10:53 am   Why 'reaction' isn't suitable here? What's "structural value"?
 

Business English Lesson, Advanced Level

ESL/EFL Test #184 "Efficient Capital Markets", question 7

Future cash flows are discounted by an interest rate that is a ......... of the riskiness of those cash flows; the riskier the cash flows, the higher is the rate used.

(a) compensation
(b) function
(c) reaction
(d) reversal

Business English Lesson, Advanced Level

ESL/EFL Test #184 "Efficient Capital Markets", answer 7

Future cash flows are discounted by an interest rate that is a function of the riskiness of those cash flows; the riskier the cash flows, the higher is the rate used.

Correct answer: (b) function

Your answer was: incorrect
Future cash flows are discounted by an interest rate that is a reaction of the riskiness of those cash flows; the riskier the cash flows, the higher is the rate used.
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Hi,

Don't know why "reaction" isn't suitable here, by the way, what's "structural value"?

Thanks!
F.F
FangFang
I'm here quite often ;-)


Joined: 18 May 2006
Posts: 369

Why 'reaction' isn't suitable here? What's "structural value"? #2 (permalink) Sun Nov 19, 2006 11:47 am   Why 'reaction' isn't suitable here? What's "structural value"?
 

.
It would, if possible, read 'reaction to', FangFang-- but anyway, I don't think that interest rates normally 'react'; they are simply percentages determined by the people who do react to perceived riskiness. They might 'reflect', but that is not an option here.

'Structural value' means nothing at all, as far as I know, sorry-- the word 'structural' just seemed to me to be a good distractor among these answers.

MM
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