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- The Role and Objective of Financial ManagementThe Domestic and International Financial MarketplaceEvaluation of Financial PerformanceFinancial Planning and ForecastingThe Time Value of MoneyFixed Income Securities: Characteristics and ValuationCommon Stock: Characteristics, Valuation, and IssuanceAnalysis of Risk and ReturnCapital Budgeting and Cash Flow AnalysisCapital Budgeting: Decision Criteria and Real Option ConsiderationsCapital Budgeting and RiskThe Cost of CapitalCapital Structure ConceptsCapital Structure Management in PracticeDividend PolicyWorking Capital Policy and Short-term FinancingThe Management of Cash and Marketable SecuritiesManagement of Accounts Receivable and InventoriesLease and Intermediate-term FinancingFinancing With DerivativesRisk ManagementInternational Financial ManagementCorporate RestructuringAppendix: Continuous Compounding and DiscountingAppendix: Mutually Exclusive Investments Having Unequal LivesAppendix: Breakeven AnalysisAppendix: Bond Refunding AnalysisAppendix: Taxes

Question 1

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probability distribution

standard deviation

expected value

coefficient of variation

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Question 2

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smaller, larger the expected return on

larger, riskier

smaller, riskier

larger, smaller the expected return on

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Question 3

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systematic risk, unsystematic risk

standard deviation, coefficient of variation

correlation, covariance

security market line, characteristic line

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Question 4

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standard deviation

coefficient of variation

correlation

covariance

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Question 5

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beta

systematic risk

total risk

both beta and systematic risk

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Question 6

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standard deviation, covariance, expected value

covariance, expected value, standard deviation

coefficient of variation, standard deviation, expected value

coefficient of variation, systematic risk, expected value

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Question 7

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relative

absolute

systematic

unsystematic

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Question 8

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coefficient of variation

correlation coefficient

standard deviation

covariance

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Question 9

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standard deviation, standard deviation

risk, risk

expected return, expected return

standard deviation, risk

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Question 10

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the coefficient of variation is easier to compute.

the standard deviation is a measure of relative risk whereas the coefficient of variation is a measure of absolute risk.

the coefficient of variation is a measure of relative risk whereas the standard deviation is a measure of absolute risk.

the standard deviation is rarely used in practice whereas the coefficient of variation is widely used.

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Question 11

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The risk of the portfolio is equal to 7 percent.

The lower the correlation of returns between the two stocks, the higher the portfolio's risk.

The risk of the portfolio is primarily dependent on the utility function of the investor.

The higher the correlation of returns between the two stocks, the higher the portfolio's risk.

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Question 12

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interest rate changes

foreign competition with an industry's products

changes in the overall economic outlook

changes in the inflation rate

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Question 13

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is defined as the slope of a line relating an individual security's return to the returns of other securities in that firm's primary industry.

provides a picture of the risk-return tradeoff required by diversified investors considering various risky assets.

has as its slope the beta of the security

is determined by the prevailing level of risk-free interest rates minus a risk premium

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reduce its slope

shift it down and to the right

shift it up and to the left

reduce required returns for investors in any individual asset

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a measure of volatility of a security's returns relative to the returns of a broad-based market portfolio of securities.

the ratio of the variance of market returns to the covariance of returns on a security with the market

the inverse of the slope of the security regression line

all of the above

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Question 16

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the security has average systematic risk

the security has above-average systematic risk

the security has no unsystematic risk

the security has below-average systematic risk

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Question 17

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the time value of money

beta

total risk

portfolio diversification

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Question 18

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estimating expected future market returns

determining the most appropriate measure of the risk- free rate

determining an asset's future beta

all of the above are problems in application of the CAPM

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Question 19

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-1

0

+1

-100

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Question 20

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changes in the amount of foreign competition facing an industry

changes in investor expectations about the economy

interest rate changes

changes in purchasing power

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