1. Which of the following statements are true? a. The value of any investment is based on the cash flows it is expected to generate in the future. b. Investors are not generally risk averse. c. Uncertain cash flows are preferred to certain cash flows. d. All of the above are true. e. None of the above are true. 2. A basic knowledge of finance will help you with your personal investments by helping you understand a. how to accurately predict changes in the short-term interest rates. b. how to determine the optimal dividend policy for each firm. c. how to determine which technology is most likely to be accepted by consumers. d. how to review companies and industries to determine their prospects for future growth and the risk inherent in those companies and industries. e. how to predict the growth in sales for the firm. 3. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds? a.A reduction in market interest rates. b.The company's bonds are downgraded. c.An increase in the call premium. d.Answers a and b are both correct. e.Answers a, b, and c are all correct.
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
1. Which of the following statements are true?
a. The value of any investment is based on the cash flows it is expected to generate in the future.
b. Investors are not generally risk averse.
c. Uncertain cash flows are preferred to certain cash flows.
d. All of the above are true.
e. None of the above are true.
2. A basic knowledge of finance will help you with your personal investments by helping you understand
a. how to accurately predict changes in the short-term interest rates.
b. how to determine the optimal dividend policy for each firm.
c. how to determine which technology is most likely to be accepted by consumers.
d. how to review companies and industries to determine their prospects for future growth and the
risk inherent in those companies and industries.
e. how to predict the growth in sales for the firm.
3. Which of the following events would make it more likely that a company would choose to call its
outstanding callable bonds?
a.A reduction in market interest rates.
b.The company's bonds are downgraded.
c.An increase in the call premium.
d.Answers a and b are both correct.
e.Answers a, b, and c are all correct.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
