134A06M2

134A06M2 - Name: Perm: ECON 134A MIDTERM EXAM II July 25,...

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Name: Perm: ECON 134A MIDTERM EXAM II July 25, 2006 Please use your scantron to answer the multiple-choice questions from 1 – 8. Please choose one most correct answer for each multiple-choice question, which is worth 7 pts each. For Questions 9 and 10 , please write down your answers on this exam. 1. Inflation is treated properly in NPV analysis by A. Discounting nominal cash flows by a nominal discount rate. B. Discounting real cash flows by a real discount rate. C. Discounting nominal cash flows by a real discount rate. D. Discounting real cash flows by a nominal discount rate. E. Both A and B. 2. The combination of the efficient set of portfolios with a riskless lending and borrowing rate results in: A. The capital market line which shows that all investors will only invest in the riskless asset. B. The capital market line which shows that all investors will invest in a combination of the riskless asset and the tangency portfolio. C. The security market line which shows that all investors will invest in the riskless asset only. D. The security market line which shows that all investors will invest in a combination of the riskless asset and the tangency portfolio. E. None of the above. 3. A portfolio contains four assets. Asset 1 has a beta of .8 and comprises 30% of the portfolio. Asset 2 has a beta of 1.1 and comprises 30% of the portfolio. Asset 3 has a beta of 1.5 and comprises 20% of the portfolio.
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This note was uploaded on 06/22/2009 for the course ECON 134a taught by Professor Lim during the Spring '08 term at UCSB.

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134A06M2 - Name: Perm: ECON 134A MIDTERM EXAM II July 25,...

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