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Which of the following statements concerning financial risk is false?
a. Generically, financial risk is related to the probability of a return that is less than expected.
b. If the returns on two investments move in unison (are perfectly positively correlated), combining the two into a portfolio will lower risk.
c. If the returns on two investments move in unison (are perfectly positively correlated), combining the two into a portfolio will not affect risk.
d. In the real world, it is not possible to create a riskless portfolio because all investment returns, to a greater or lesser extent, move with the overall economy.
e. Assume you know for certain that an investment will return negative 10 percent. (In other words, the probability of a negative 10 percent return is 100 percent.) Although the expected return is negative, the investment is riskless.
Crossfade Co. issued 16-year bonds two years ago at a coupon rate of 8.5 percent. The bonds make semiannual payments.
There is an ongoing debate about the cost-benefit relationship of internal controls and their ethical implications. Find one recent news article (published within the past three years) relating to internal controls over cash. Search Web sites like th..
What is a firm's weighted-average cost of capital if the stock has a beta of 1.45, Treasury bills yield 5%, and the market portfolio offers an expected return of 14%? In addition to equity, the firm finances 30% of its assets with debt that has a yie..
The internal rate of return
Describe the differences between the top down and the bottom up sales forecast methods. Describe advantages and disadvantages of each. Do you think one approach is likely to be more accurate than the other? Explain.
You have been offered the opportunity to invest in a project that will pay $1,532 per year at the end of the years one through three and $11,071 per year at the end of years 4 and 5. If the appropriate discount rate is 18.88 percent per year, what is..
You bought a share of 5.80 percent preferred stock for $93.68 last year. The market price for your stock is now $96.42. What is your total return for last year?
Eastern Electric currently pays a dividend of about $1.72 per share and sells for $31 a share. If investors believe the growth rate of dividends is 3% per year, what is the opportunity cost of capital? If investors' opportunity cost of capital is 10%..
Weaver Chocolate Co. expects to earn $3.50 per share the next year, its expected dividend payout ratio is 75%, its expected constant dividend groth rate is 6.0%, and its common stock currently sells for $32.50 per share. New stock can be sold to the ..
What strategies have you used?Explain the importance of reviewing your credit report. How often should this be done? What are the implications of opening and closing credit cards on one's credit card status and score?
First being very specific clearly identify the underlined item or concept from the text, Additional Text Readings or lectures and then. Value creation from the view point of manager for Caterpillar?
From the view point of a potential equity investor in Target Corporation, provide a measure of RISK in investing in ownership shares. Clearly indicate which methodology you have used to estimate risk. Provide a numerical measurement of risk. Indicate..
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