Choose the most correct answer

Question 2 A share has a beta of 1.2. The risk-free rate of return is 4.0% and the expected return on the market is 10.3%. What is the expected return of the share

? A. 16.40%

B. 15.79%

C. 15.36%

D. 11.56%

Question 4 Which method should be used to select mutually exclusive projects if the amount of available capital is limited and not all available projects can be undertaken?

A. Profitability index

B. Payback period

C. NPV

D. IRR

Question 5 Which of the following are incremental cash flows that should be included in an NPV project evaluation?

A. Opportunity costs

B. Sunk costs

C. Externalities

D. Both (a) and (c)

Question 6 Which of the following pairs of shares is likely to have the highest correlation?

A. Shares in two firms in different industries and different countries.

B. Shares in two firms in different industries but the same country.

C. Shares in two firms in the same industry but different countries.

D. Shares in two firms in the same industry and the same country.

Question 7 What does the CML represent?

A. The relationship between return and total risk for efficient portfolios.

B. The relationship between return and unsystematic risk for efficient portfolios.

C. The relationship between return and systematic risk for all assets and portfolios.

D. None of the above.