Question

2. As long as the interest rate is greater than zero, the present value of a single sum will always:

Select one:

a. Equal the future value if the time period is one year.

b. Increase as the interest rate increases.

c. Be more than the future value.

d. Increase as the number of periods decreases.

e. Decrease as the number of periods increases.

3.

A project costs $525 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?

Select one:

a. 5.67 years

b. 6.00 years

c. The project never pays back

d. 5.33 years

e. 5.00 years

3.

Your portfolio consists of two stocks. You have $2000 in stock A and $8000 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.6. What is your portfolio standard deviation?

Select one:

a. 10.2%

b. 9.8%

c. 6.8%

d. 10.9%

e. 11.2%

4.

A project which has a discounted payback period equal to its life also has a positive NPV.

Select one:

True

False

5.

A firm's stock has a required return of 10%. The stock's dividend yield is 2.5%. What is the dividend the firm is expected to pay over a one year period if the current stock price is $80?

Select one:

a. $2.40

b. $2.80

c. $3.60

d. $2.00

e. $3.20

6.

The party to a leasing arrangement that is entitled to a business expense based upon its use of an asset is called the:

Select one:

a. Lessor.

b. Transferor.

c. Financee.

d. Lessee.

e. Manufacturer.

Answer 1

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2. As long as the interest rate is greater than zero, the present value of a single sum will always:

e. Decrease as the number of periods increases.

3. A project costs $525 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?

b. 6.00 years.

3. Your portfolio consists of two stocks. You have $2000 in stock A and $8000 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.6. What is your portfolio standard deviation?

d. 10.9%.

4. A project which has a discounted payback period equal to its life also has a positive NPV.

True.

5. A firm's stock has a required return of 10%. The stock's dividend yield is 2.5%. What is the dividend the firm is expected to pay over a one year period if the current stock price is $80?

d. $2.00

6. The party to a leasing arrangement that is entitled to a business expense based upon its use of an asset is called the:

d. Lessee.