1. Given a specific asset and specific time period, it is always the case that the assets arithmetic mean return will

• Lower than its geometric mean return
• Equal to its geometric mean return
• Higher than its geometric mean return
• Higher than or equal to its geometric mean return
• Lower than or equal to its geometric mean return

2. Ultimately, investors diversify their portfolio in order to

• Reduce its risk
• Increase its return
• Increase its risk
• Reduce its return
• Increase its risk-adjusted return

3. Consider ABC, a large tech company, and XYZ, a small umbrella manufacturing company. If these two companies had the same beta, then according to the CAPM

• They both should have the same required return on equity
• ABC should have a higher return on equity than XYZ
• ABC should have a lower return on equity than XYZ
• They both should have a required return higher than that of the average company
• They both should have a required return lower than that of the average company

4. When the investment recommendation (invest or do not invest) that follows from the NPV approach and the IRR approach are in conflict, you should

• Follow the recommendation from the NPV approach
• Follow the recommendation from the IRR approach
• Follow the recommendation from the NPIA (Net Present Internally Adjusted) approach
• Ignore both
• Abandon the project

5. A company that started the year 2019 with $100 million in capital, generated during 2019 a NOPAT of $10 million, and had a cost of capital of 12%, had an EVA of

• $2 million and therefore created value
• $2 million and therefore destroyed value
• $0 and neither created nor destroyed value
• -$2 million and therefore created value