1. Jennifer uses the discounted payback method to evaluate any project that costs less than $1 million. Applying the discounted payback decision rule to all projects is most likely to cause:

The most liquid projects to be rejected in favor of the less liquid projects.

Projects to be incorrectly accepted due to ignoring the time value of money.

A firm to become more long-term focused.

Some projects to be accepted which would otherwise be rejected under the payback rule.

Some positive net present value projects to be rejected.

2. Melinda has two investments: a risk-free asset and the market portfolio. She has graphed both investments' expected return as a function of each investments' beta. The slope of the line connecting the two dots represents the:

Beta coefficient

Market risk premium

Market standard deviation

Risk-free interest rate

Market beta

3. Tyler is concerned about his portfiolio so he asks his best friend Tippie for some advice. Since Tippie is a certified financial advisor, he is most likely to counsel Tyler that:

Concentrating an investment in three companies all within the same industry will greatly reduce the systematic risk.

Spreading an investment across many diverse assets will eliminate all of the systematic risk.

Spreading an investment across five diverse companies will not lower the total risk.

Concentrating an investment in two or three large stocks will eliminate all of the unsystematic risk.

Spreading an investment across many diverse assets will eliminate some of the total risk.