q4version1 (1)

q4version1 (1) - MGT 3062 FINANCIAL MANAGEMENT FALL 2009...

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Student: ____________________________________________________ ID: ______________________ Choose the BEST answer to each question. Bubble in your answer on the form provided. If you feel the answer is not provided, show your work, explain your assumptions, and write your answer on the exam. Remove all hats and dark glasses. If you have to go to the restroom, go now. No electronic devices allowed. You may not use your cell phone as a calculator. As a courtesy to your classmates, no questions are allowed after the initial instructions are given. Ethics Challenge: I swear by everything I hold sacred and my family honor that: the work on this exam is my own without outside assistance, that I did not provide assistance to another classmate, that I used no electronic devices for information storage, retrieval, or communications, that I have abided by the Georgia Tech honor code in the preparation and execution of this exam. Signature:____________________________________________________________________________ Student: ___________________________________________________________________________ Choose the BEST answer to each question. Bubble in your answer on the form provided. If you feel the answer is not provided, show your work, explain your assumptions, and write your answer on the exam. Remove all hats and dark glasses. If you have to go to the restroom, go now. No electronic devices allowed. You may not use your cell phone as a calculator. As a courtesy to your classmates, no questions are allowed after the initial instructions are given. Ethics Challenge: I swear by everything I hold sacred and my family honor that: the work on this exam is my own without outside assistance, that I did not provide assistance to another classmate, that I used no electronic devices for information storage, retrieval, or communications, that I have abided by the Georgia Tech honor code in the preparation and execution of this exam. Signature:____________________________________________________________________________ 1. The principle of diversification tells us that: A. spreading an investment across many diverse assets will eliminate some of the total risk. B. spreading an investment across many diverse assets will eliminate all of the systematic risk. C. concentrating an investment in three companies all within the same industry will greatly reduce the systematic risk. D. spreading an investment across five diverse companies will not lower the total risk. E. concentrating an investment in two or three large stocks will eliminate all of the unsystematic risk. 2. The common stock of Low Cost Foods is expected to earn 15 percent in a recession, 7 percent in a normal economy, and lose 6 percent in a booming economy. The probability of a boom is 5 percent, the probability of a normal economy is 80 percent, and the chance of a recession is 15 percent. What is the expected rate of return on this stock? A. 8.45 percent
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q4version1 (1) - MGT 3062 FINANCIAL MANAGEMENT FALL 2009...

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