1 )Identify the term that correctly represents a cash payment made by a firm to its owners in the normal course of business operations.

Group of answer choices

Cash dividend

bonus shares

capital gain

stock dividend

2)

If the CAPM model to estimate the cost of equity is given as, Ri=rfr+(Rmrfr)Ri=rfr+(Rmrfr); then the expected excess return on market is computed as:

Group of answer choices

Ri-Rfr

Rm

beta* (rm-rfr)

rm-rfr

3)

One of the main issues with making use of a firm's overall beta while discounting projects having different levels of risk is that:

Group of answer choices

(b) You may end up rejecting too many low-risk projects.

(a) You may end up accepting too many high-risk projects.

Both (a) and (b)

You may end up rejecting too many high risk projects

4)

Which of the following is the most correct statement?

Group of answer choices

A firm will have high beta if it has a low operational leverage

A firm will have high beta if it has a low cyclical business activity

A firm will have high beta if it has a low financial leverage

A firm will have high beta if it has a high cyclical business activity

5)

The most important deficiency of Accounting rate of return method is that it makes use of ------------- instead of cash flows. Fill in the blanks with the appropriate choice.

Group of answer choices

Present value of cash flows

Accounting profits

Time value of money

Tax profits

6)

Consider a portfolio named Zeta, consisting of say two securities A & B. Under what condition will the standard deviation of Zeta be less than the weighted average

of the standard deviations of the individual securities A & B?

Group of answer choices

Beta is 0

Beta less than 1

Market return is more than 1

Correlation between A & B is less than 1

7)

ABC ltd. increased its credit period for customers from 30 days to 60 days. This will effectively _____ the price paid by a customer and also......... sales. Fill in the blanks with the most appropriate responses.

Group of answer choices

decrease; increase

increase; decrease

increase; increase

decrease; decrease