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2-Which of the following statements are most correct?_____

A. Preferred

dividends paid are not tax deductible.

B. Interest

expense payments are not tax deductible.

C. Common

dividends paid are tax deductible.

D. None of the statements above is

correct. 0%

4-If the expected annual return is 5.8%, how long will it

take to double our money? _______

A. 9.5 years 0%

B. 10.8

years

C. 11.6

years

D. 12.3

years

5-Which of the following statements about portfolio is true?

______

A. The expected return of a portfolio is

NOT the weighted average of the expected returns of all individual stocks in

the portfolio. 0%

B. The

standard deviation of a portfolio is NOT the weighted average of the standard

deviations of all individual stocks in the portfolio.

C. Portfolio

beta is NOT the weighted average of the beta values of all individual stocks in

the portfolio.

8-Project selection ambiguity can arise if you rely on the

internal rate of return (IRR) instead of the net present value (NPV) when

A. A

projects cash flows are normal.

B. There are

multiple IRRs.

C. Projects are mutually exclusive. 0%

D. Both B

and C are correct

12- Any change in beta is likely to affect the required rate

of return on a stock, which implies that a change in beta will likely have an

impact on the stock’s price.______

False True

16- If an investor buys enough stocks, he or she can,

through diversification, eliminate all of the market risk inherent in owning

stocks, but as a general rule it will not be possible to eliminate all

company-specific risk. ______

A. True. 0%

B. False

20-Which of the following statements about sinking fund is

true? ______

A. Sinking

funds are designed to protect bondholders, so it never hurts the bondholders in

any situations.

B. A company

would use sinking fund for open market purchase of bond if the interest rate is

greater than its coupon rate.

C. A company would prefer to use sinking

fund to call bond if bond sells at a discount. 0%

26-Under what forms of Efficient Market Hypothesis,

investors can NOT profit via inside information? ______

A. Weak-form

Efficient Market Hypothesis

B. Semi-strong

form Efficient Market Hypothesis

C. Strong-form

Efficient Market Hypothesis

D. All of the above. 0%

33-A store is offering a diamond ring for sale for 36 months

at $125 per month. The retail price of the ring is $3,900. What is the interest

rate on this offer?

A. 9.54%

B. 14.90% 0%

C. 10.33%

D. 11.62%

34-You want to receive $5,000 per month in retirement. If

you can earn 0.5% per month and you expect to need the income for 25 years, how

much do you need to have in your account at retirement?

A. $776,034

B. $823,798 0%

C. $986,453

D. $998,204

39- An investor is forming a portfolio by investing $59,282

in stock A which has a beta of 1.50, and $39,156 in stock B which has a beta of

1.50. The return on the market is equal to 8% and treasure bonds have a yield

of 3% (rRF). WhatÂ¡Â¯s the portfolio beta? ______

A. 1.50

B. 3.00

C. 1.40 0%

D. 1.80

46- A firm is considering a new inventory system that will

cost $120,000. The system is expected to generate positive cash flows over the

next four years in the amounts of $35,000 in year 1, $55,000 in year 2, $65,000

in year 3, and $40,000 in year 4. The firmÂ¡Â¯s required rate of return is 9%.

What is the internal rate of return (IRR) of this project?

A. 14.03%

B. 17.56% 0%

C. 19.26%

D. 21.78%

47- A firm is considering a new inventory system that will

cost $120,000. The system is expected to generate positive cash flows over the

next four years in the amounts of $35,000 in year 1, $55,000 in year 2, $65,000

in year 3, and $40,000 in year 4. The firmÂ¡Â¯s required rate of return is 9%.

What is the profitability index (PI) of this project?

A. 0.87

B. 1.11 0%

C. 1.31

D. 1.83.

48- A Corporation’s stock is selling for $40 in the market.

The company’s beta is 0.8, the market risk premium (rM – rF) is 6%, and the

risk-free rate is 9%. The most recent dividend paid is D0 = $2 and dividends

are expected to grow at a constant rate g. What’s the dividend growth rate g

for this stock? ______

A. 7.00%

B. 7.81% 0%

C. 8.38%

D. 13.80%

49-Using the information from Question 48, find the stock’s

capital gain yield. ______

A. 6.00% 0%

B. 6.19%

C. 7.81%

D. 8.38%

50- Using the information from Question 48 and 49, calculate

the stock’s dividend yield. ______

A. 5.00%

B. 5.19%

C. 5.42%

D. 6.00% 0%