If exam 3 were to be a thing

The majority of the diversifiable risk in a portfolio can be eliminated by owning as few as ________ stocks.

10

Of the options listed below, which is the best measure of systematic risk?

Beta

Which one of the following statements related to the internal rate of return (IRR) is correct?

The IRR is equal to the required return when the net present value is equal to zero

A project has a net present value of zero. Given this information:

The project's cash inflows equal its cash outflows in current dollar terms

An unexpected post on social media caused the prices of 22 different companies' stocks to immediately increase by 10 to 15 percent. This occurrence is best described as an example of ________ risk.

Unsystematic

An investor who owns a well-diversified portfolio would consider ________ to be irrelevant.

Unsystematic risk

The ________ explains the relationship between the expected return on a security and the level of that security's systematic risk.

Capital asset pricing model

For any given capital project proposal, the discount rate should be based on the:

Risks associated with the use of the funds required by the project

________ risk is measured using the standard deviation

Total

Cerda Diagnostics spent $5,000 last week repairing equipment. This week the company is trying to decide whether the equipment could be better utilized by assigning it to a proposed project. When analyzing the proposed project, the $5,000 should be treated as which type of cost?

Sunk

The market risk premium equals the:

Market rate of return minus the risk-free rate of return

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 project's:

Incremental cash flows

Of the options listed below, which is the best example of systematic risk?

Investors panic causing security prices around the globe to fall precipitously

Which of the following statements regarding unsystematic risk is accurate?

It can be effectively eliminated by portfolio diversification

The ________ is the excess return earned by a risky asset over the return earned by a risk-free asset.

Risk premium