Finance

Which of the following items are included when calculating the expected return on a portfolio

1. percentage of the portfolio invested in each individual security 2. projected states of the economy 3. the performance of esch security given various economic states 4. probability of occurence for eacg state of the economy

which of the following is a sunk cost

2000 paid last year to rent equipment

When using economic probabilities to compute the expected return on a stock, the result is:

A mathematical expectation based on a weighted avg and not a guaranteed outcome

wright market research is able to borrow money at a rate of 6.8 percent per year. the interest rate is called the

Cost of debt

while evaluating a stock you estimate that it will earn a return of 11 percent if economic conditions are favorable and 3 percent if you colonic conditions are unfavorable. given probabilities of favorable versus unfavorable economic conditions you conclude that the stock will earn 7.2 percent figure is called the

Expected return

all of the following cash flows are related to a proposed project. which one of these should be included in the cash flow at time 0

Initial investment in inventory to support the project

which of the following statements regarding unsystematic risk is accurate

It can be effectively eliminated by portfolio diversification

When calculating the expected rate of return on a stock portfolio using a weighted avg. the weights are based on the

Market value of the investemnt in each stock

Given a well-diversified stock portfolio, the variance of the portfolio:

May be less than the variance of the least risjy stock in the portfolio

Which of the following correctly describes the dividend yield

Next years annual dividend divided by todays stock price

The excess return is computed as the

Return on risky security minus the risk-free rate

Assume that last years t-bills returned 2.2 percent while your investment in large-company stocks is armed an avg of 8.1 percent. which one of the following terms refers to the difference between these two rates

Risk premium

to calculate the expected risk premium on a stock one must subtract the ________ from the stocks expected return

Risk-free rate

inside information has the least value when financial markets are

Strong form efficient

vanessa purchased a stock one year ago and sold it today for $3.15 per share more than her purchase price. she received a total of $2.60 per share in dividends.which one of the following statements is correct in relation to this investment.

The capital gains yield is positive

Efficient financial markets fluctuate continuously because:

The matkets are continually reacting to new information

to determine a firms capital one must include

The returns currently required by both debtholders and stockholders

Rate of return on which type of security is normally used as the risk free rate of return

Treasury bills

Standard deviation is a measure of which one of the following

Volatility

Which one of the following is most indicative of the totally efficient stock market

Zero net present values for all stock investmentd

assume a firm utilize the security market line approach to determine the cost of equity. if the firm currently pays an annual dividend of $2.40 per share and has a beta of 1.42, all else constant, which of the following actions will decrease that firms cost of equity

a decrease in the firms beta

of the options listed which is the best example of unsystematic risk

a national decrease in consumer spending on entertainment

which on the following statements best defines the efficient market hypothesis

all securities in an effcient market are zero net present value investment

when calculating a firms weighted avg cost of capital, the capital structure weights

are based on the market values if the outstanding securities

when evaluating any capital project proposal the cost of capital

depends upon how yhe funds raised for that project are going to be spent

Assume all stock prices fairly reflect all of the available information on those stocks. which one of the following terms best defines the stock market under these conditions

efficient capital market

Pro forma statement for a proposed project should generally do all of the following except

include interest expense

The stand-alone principle advocated that project analysis should be based solely on which one the following costs

incremental

The difference between a company's future cash flows if it accepts a project and the company's future cash flows if it does not accept the project is referred to as the projects

incremental cash flows.

Of the options listed which is the best example of systematic risk

investors panic causing security prices arounf the globe to fall percipitously

Which of the following statements is true of a portfolios standard deviation

it cab be less than the standard deviation of the least risky security in the portfolio

which of the following statements regarding a firms pretax cost of debt is accurate

it is based on the current yield to maturity of the companys outstanding bondsman

Which of the following statements is accurate regarding the dividend growth model

it is only as reliable as the estimated rate of growth

which one of the following should not be included in the analysis of a new product

money already spent for research and decelipment of the new product

The option that is forgone so that an asset can be utilized by a specific project is referred to as which one of the following

opportunity cost

With respect to returns, which one of the following statements is accurate

over time the avg inexpected return will be zero

Bich i owns several financial instruments: stocks issued by seven different companies, plus bonds issued by four different companies. her investment are best described as a

portfolio

Radiator owns stocks of 15 different companies. together the stocks have a value of 78,640. twelve percent of that total value is from one company. Gambrell & Valde. The twelve percent figure is called an

portfolio weight

the cost of preferred stock is equivalent to the

rate of return on a perpetuity

for any given capitals project proposal, the discount rate should be based on

risks associated with the use of the funds required by the projects

a furniture store is considering adding kitchen appliances to its offerings. which one of the following is the best example of an incremental cash flow related to the appliances?

selling furnuture to appliance customers

which one of the following types of costs was incurred in the past and cannot be recouped

sunk

most financial securities have some level of _______risk

systematic

Pro forma financial statement can best be described as financial statement

that state projected costs for future time periods

which one of the following is the most likely reason why a stock price might not react at all on the day after hat new information related to the stocks issuer is released? assume the market is semi strong from efficient

the information was expected

the expected return of a stock based on the likelihood of various economic outcomes, equals the

weighted avg of the returns for each economic state