reliable paper writing on Finance Course Assignment Questions Unit 3

Question 1

Fluctuations in stock values that are not related to an aspect of a particular stock but that are caused by market-wide events are called:

		systematic risks.
		diversifiable risks.
		recessions
		foreseeable risks.

Question 2

A transaction in which an investor sells stock today that the investor does not own with an obligation to buy stock in the future is called:

		illegal.
		a short sale.
		a long sale.
		a hedge.

Question 3

The concepts of variance and standard deviation are the most common measures of risk, but they:

		do not distinguish between downside and upside risks.
		do not always yield the same result.
		cannot be used with very risky investments.
		require proprietary information about the investment that is being evaluated.

Question 4

For investments involving significant risk, the cost of capital is equal to the:

		risk-free interest rate plus an appropriate risk premium.
		rate of return on the investment.
		NPV of the future income from the investment.
		systematic risk of the investment.

Question 5

For purposes of measuring certain risks and returns, a “risk-free” investment is used as a comparison. The most frequently used risk-free investment is:

		AAA corporate bonds.
		U.S. Treasury bills.
		the Euro.
		the Japanese yen.

Question 6

Because investors generally do not like risk, investors usually:

		do not invest in risky investments.
		demand a risk premium form their investment.
		hedge their risky investments with low risk investments.
		limit their investments when risks are high.

Question 7

When an investor borrows money to invest in stock, that investor is:

		buying on margin.
		over-leveraging their position.
		reducing the risk of the investment.
		increasing the yield of the investment.

Question 8

What is the most accurate measure of the return from a security?

		Expected return
		Discounted return
		Realized return
		NPV of return

Question 9

The cost that a firm must pay for the money that it borrows is called the:

		debt cost of capital.
		equity cost of capital.
		overall cost of capital.
		negative cost of capital.

Question 10

__________ is a security that trades directly on a stock exchange like any other publicly traded stock but represents ownership in a portfolio of stocks rather than an ownership interest in one corporation.

		A bond
		An exchange-traded fund
		A preferred stock
		A market proxy

 

 

 

 

 

Written Responses:

• There is a 200 word minimum response required.
• Credible reference materials, including your course textbook(s), may be used to complete the assessment.

Question 11

Cooper Construction is considering purchasing new, technologically advanced equipment. The equipment will cost $625,000 with a salvage value of $50,000 at the end of its useful life of 10 years. The equipment is expected to generate additional annual cash inflows with the following probabilities for the next ten years:

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Question 12

The Capital Asset Pricing Model rests on three assumptions. What are those assumptions, and how realistic are they for firms operating in competitive markets?

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