Part 1: When we talked about risk and return we classified individuals into categories based on their attitude toward risk. We decided that for the economy as a whole, most people are:

a. risk neutral

b. risk averse

c. risk takers

Part 2: When we talked about using beta as a measure of risk rather than the total risk of a stock, we decided that for the economy as a whole people will form portfolios because they are assumed to be:

a. rational

b. irrational

c. risk averse

d. risk takers

e. both a and c

f. both b and d

Part 3: We went through a few examples illustrating that the financial break even and the accounting break even quantities can be very different values. The difference between the two is due to the fact that the accounting breakeven:

a. is a better measure of the breakeven quantity

b. the financial break-even quantity is measured in dollars while the accounting breakeven is in units

c. the accounting breakeven is a better measure since it shows how profitable a project is

d. the accounting breakeven does not provide a fair rate of return to suppliers of capital