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FINANCE JIUCURI ILI LIURI TF o 1. RETURN = LOSS/ORIGINAL COST 0 2 . If Stock X has a higher profit than Stock Y, it is not fair to assume that Stock X's HPR will be higher. 3 . A quarterly return of 3% equates to an EAR of 12%. 0 0 4 . A firm's net worth and capitalization are not synonymous. 0 5 . The symbol for variance is "o". . 0 6 . Large company stocks tend to have larger standard deviations than small company stocks. 0 7 . In a normal distribution, about 95% of all observations fall within two standard deviations of the average. 0 8.. It is not possible to earn more than 100% in a single year. 0 9 . In the CAPM, the "M" stands for Model. 0 1 0. In the CAPM, stocks with larger betas will have lower expected returns. 0 11. The SML intersects the risk axis when drawn. 12. The market risk premium would not be the same for high-beta and low-beta O stocks. 0 13. Systematic risk and nondiversifiable risk are synonymous. o 14. Correlations can only be positive. 0 1 5. When two states of the economy are equal and possible returns are -10% and 8%, the expected return the discounted payback period for the same project ifr>0. 4. The first R in IRR stands for Rate. 5. When the IRR serves as a project's discount rate, the NPV >$0, No project can have more than one IRR. 7 . To graph a project's IRR, NPVs are arrayed along the vertical axis. ) A project's EAA is expressed in dollars. 9 . A project is a go when its hurdle rate 0. 13. It is not fair to say that the discounted payback period ignores the time value of money. 0 1 4. The second "A" in EAA stands for Average. (15) The IRR assumes that cash flows are reinvested at the required rate. FYLLJIVICI ILI LLLLL TF 0 1 . Flotation costs act to decrease Rp- O 2. The after-tax cost of debt is represented by Rd. 3. The "M" in SML stands for Market. 4. The "A" in WACC stands for Annual. 5. The symbol B appears in the SML equation. 0 6 . For a firm with debt, V

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