Mod 43 Wrong Answers

Question 1

Identify the determinate of long term interest rates under market segmentation theory?

Answer 1

Life insurance companies

Question 2

A curve on a graph with the rate of return on the vertical axis and time on the horizontal axis depicts a…

Answer 2

Yield curve showing term structure of interest rates

Question 3

Basis risk, define

Answer 3

Risk of loss from ineffective hedging activities

Question 4

Which of the following techniques recognizes that management often faces a series of decisions that may affect the value of an investment?

Answer 4

Decision tree

Question 5

If NPV > 0, then IRR is…

Answer 5

IRR > discount rate

Question 6

The internal rate of return considers…2

Answer 6

1 net incremental investment

2 net annual cash flows

Question 7

A project’s net present value, ignoring income tax considerations, is normally affected by the…

Answer 7

Proceeds from sale of asset to be replaced

Question 8

The accounting rate of return equation

Answer 8

ARR = expected increase in annual net income/average investment

Question 9

What is the equation for the expected return of the portfolio?

Answer 9

Expected return of portfolio =

Weighted avg. of expected returns of assets