Question

Which of the following statements is most correct? A. Profitability Index decision rule adjust for the time value of money B. Payback period decision rule provides information on whether the project is creating value for the firm C. NPV decision rule cannot be used to evaluate mutually exclusive projects D. IRR decision rule is the best method of analyzing mutually exclusive projects Which of the following statements is NOT correct? A. Capital asset pricing model explains the relationship between the expected return on a security and the level of that security's total risk B. Market risk premium is represented by the slope of the security market line C. The intercept point of the security market line is the rate of return which corresponds to the risk-free rate D. Security market line is a positively sloped linear function that is created when expected returns are graphed against security betas.

Which of the following statements is most correct?

	A.	The unsystematic risk can be effectively eliminated by portfolio diversification.
	B.	Investors will get rewarded for both systematic risk and unsystematic risk
	C.	Beta measures the total risk of a financial asset.
	D.	Standard deviation measures the nondiversifiable risk of a financial asset.

Answer 1

1) A. Profitability Index decision rule adjust for the time value of money

2) A. Capital asset pricing model explains the relationship between the expected return on a security and the level of that security's total risk

3) A. The unsystematic risk can be effectively eliminated by portfolio diversification