FIN 3702 QUESTIONS AND ANSWERS (100% SOLVED)
The historical returns on large-company stocks, as reported by Ibbotoson and Sinqufield, are
based on: - ✔✔✔–The stocks of the 500 companies of the public traded firms in the U.S.
The present value of an investments cash inflows divided by the investments initial cost is called
the: - ✔✔✔–probability index
Which of the following is the preferred method of analyzing a proposed investment? - ✔✔✔–
Net present value
The difference between an investments market value and its cost is called the: - ✔✔✔–Net
present value
The lower the standards deviation of a security, the _________ the expected rate of return and
the _________ the risk. - ✔✔✔–lower; lower
The return on which one of the following is used as the risk-free rate of return? - ✔✔✔–U.S.
Treasury bills
If by accepting one investment you eliminate the option of another investment, you are dealing
with: - ✔✔✔–mutually exclusive investments
The analysis of the effect that a single variable has on the net present value of a project is called
_______ analysis. - ✔✔✔–sensitivity
A net present value of zero implies that an investment: - ✔✔✔–is earning a return that exactly
matches the requirement
The concept that the expected return on an investment depends solely on that asset's non-
diversifiable risk is referred to as: - ✔✔✔–The principle of diversification
The historical returns on large-company stocks, as reported by Ibbotoson and Sinqufield, are
based on: - ✔✔✔–The stocks of the 500 companies of the public traded firms in the U.S.
The present value of an investments cash inflows divided by the investments initial cost is called
the: - ✔✔✔–probability index
Which of the following is the preferred method of analyzing a proposed investment? - ✔✔✔–
Net present value
The difference between an investments market value and its cost is called the: - ✔✔✔–Net
present value
The lower the standards deviation of a security, the _________ the expected rate of return and
the _________ the risk. - ✔✔✔–lower; lower
The return on which one of the following is used as the risk-free rate of return? - ✔✔✔–U.S.
Treasury bills
If by accepting one investment you eliminate the option of another investment, you are dealing
with: - ✔✔✔–mutually exclusive investments
The analysis of the effect that a single variable has on the net present value of a project is called
_______ analysis. - ✔✔✔–sensitivity
A net present value of zero implies that an investment: - ✔✔✔–is earning a return that exactly
matches the requirement
The concept that the expected return on an investment depends solely on that asset's non-
diversifiable risk is referred to as: - ✔✔✔–The principle of diversification
