Practice_ exam3_ s06

Practice_ exam3_ s06 - 1 Practice Exam 3 s06 1 The excess...

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1 Practice Exam 3 s06 1. The excess return required from a risky asset over that required from a risk-free asset is called the: A. risk premium. B. geometric premium. C. excess return. D. average return. E. variance. 2. The notion that actual capital markets, such as the NYSE, are fairly priced is called the: A. Efficient Markets Hypothesis (EMH). B. Law of One Price. C. Open Markets Theorem. D. Laissez-Faire Axiom. E. Monopoly Pricing Theorem. 3. A portfolio of large company stocks would contain which one of the following types of securities? A. stock of the firms which represent the smallest 20 percent of the companies listed on the NYSE B. U.S. Treasury bills C. long-term corporate bonds D. stocks of firms included in the S and P 500 index E. long-term government bonds 4. On average, for the period 1926 through 2003: A. the real rate of return on U.S. Treasury bills has been negative. B. small company stocks have underperformed large company stocks. C. long-term government bonds have produced higher returns than long-term corporate bonds. D. the risk premium on long-term corporate bonds has exceeded the risk premium on long-term government bonds. E. the risk premium on large company stocks has exceeded the risk premium on small company stocks. 5. A cost that has already been paid, or the liability to pay has already been incurred, is a(n): A. salvage value expense. B. net working capital expense. C. sunk cost. D. opportunity cost. E. erosion cost. 6. You are analyzing the following two mutually exclusive projects and have developed the following information. What is the crossover rate? A. 11.113 percent B. 13.008 percent C. 14.901 percent D. 16.750 percent E. 17.899 percent
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Practice Exam 3 s06 2 7. The discount rate that makes the net present value of an investment exactly equal to zero is called the: A. external rate of return. B. internal rate of return. C. average accounting return. D. profitability index. E. equalizer. 8. Which one of the following is the best example of two mutually exclusive projects? A. planning to build a warehouse and a retail outlet side by side B. buying sufficient equipment to manufacture both desks and chairs simultaneously C. using an empty warehouse for storage or renting it entirely out to another firm D. using the company sales force to promote sales of both shoes and socks E. buying both inventory and fixed assets using funds from the same bond issue 9. It will cost $2,600 to acquire a small ice cream cart. Cart sales are expected to be $1,400 a year for three years. After the three years, the cart is expected to be worthless as that is the expected remaining life of the cooling
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Practice_ exam3_ s06 - 1 Practice Exam 3 s06 1 The excess...

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