Reference no: EM132584805

Question 1. What is the most likely explanation for a 30% return on a stock with a beta of 1.0 in a month when the market returned 12.5%?

A. The market is undervalued

B. The stock is aggressive

C. The beta is really 0.5

D. Favorable firm-specific (idiosyncratic) news was reported

Question 2. A security's total risk is composed of its___ and ___

A. Beta and idiosyncratic risk

B. Beta and market risk

C. Specific risk and firm-specific risk

D. Aggressive risk and defensive risk

Question 3. Which of the following actions will increase a firm's cash balance, all else equal.

A. Purchase of a new equipment

B. Issuance of debt

C. A decrease in accounts payable

D. An increase in inventory

Question 4. Sand 5th Avenue borrows $350 million from Trust Bank. It invests $250 million in a new generator and uses the rest, $100 million, to invest in high-yield Certificate of Deposit. What is the impact of this transaction on Sand's balance sheet?

A. Assets increase by $250 million

B. Shareholder equity increases by $100 million

C. Net income increases by $100 million

D. Liabilities increase by $350 million

Question 5. If interest is compounded semi-annually vs annually, what will happen to Future Values (FV) and Present Values (PV)?

A. FV will be lower and PV will be higher

B. FV and PV will both be lower

C. FV will be higher and PV will be lower

D. FV and PV will both be higher