Please answer questions

$1$

$$thru

$5$

:

Question

$1$

Why does the required rate of return

$($

or cost of funds

$)$

$$impact value most?

Helpful Hint: Select the "most representative" or "most correct" answer from the following choices.

Question

$1$

$$options:

a

$.$

$$This statement is incorrect. It is the growth rate that has the greatest impact on value.

b

$.$

$$This statement is incorrect. It is cash flow that has the greatest impact on value.

c

$.$

$$The required rate of return

$($

or cost of funds

$)$

$$has the greatest impact because it is located in the denominator of the value equation.

d

$.$

$$The required rate of return

$($

or cost of funds

$)$

$$has the greatest impact because it is located in the denominator of the value equation and changes exponentially over time.

e

$.$

$$The required rate of return

$($

or cost of funds

$)$

$$has the greatest impact because it changes exponentially over time.

f

$.$

$$The required rate of return has the greatest impact because it is inversely related with value in mathematical terms.

Question

$2$

When measuring the risk level of an investment

$($

or portfolio of investments

$)$

$,$

$$the higher the standard deviation, the higher the risk

$[$

and vice versa

$]$

$.$

Question

$2$

$$options:

$$True

$$False

Question

$3$

The Capital Asset Pricing Model

$($

CAPM

$)$

$$relies on multiple factors as the major or most significant drivers in quantifying risk when calculating or estimating the required rate of return.

Question

$3$

$$options:

$$True

$$False

Question

$4$

Which of the following is the most representative statement concerning the Time Value of Money calculations? Helpful hint: remember that while all of the answers MAY be correct, you are to select the one that is "most representative"

$($

i

$.$

e

$.$

$,$

$$most correct

$)$

$.$

Question

$4$

$$options:

a

$.$

$$During the explicit forecast period, the growth rate in cash flow tends to be at a higher or above

$-$

average rate.

b

$.$

$$After the explicit forecast period, the growth rate in cash flow is lower since it implies growth into perpetuity.

c

$.$

$$During the explicit forecast period, the growth rate in cash flow tends to be at a higher or above average rate while being lower after the explicit forecast period because it implies growth into perpetuity.

d

$.$

$$The present cash flow value into perpetuity or after the explicit forecast period is called "Terminal Value."

Question

$5$

The APT

$[$

Arbitrage Pricing Theory

$]$

$$model posits that the most significant risk factors influencing the required rate of return are:

Question

$5$

$$options:

a

$.$

$$Inflation and industrial

$/$

economic growth.

b

$.$

$$Inflation$,$ industrial

$/$

economic growth, and risk premiums.

c

$.$

$$Inflation$,$ industrial

$/$

economic growth, risk premiums, risk

$-$

free rate, and a random error term.

d

$.$

$$Risk

$-$

free rate, random error term, and risk premiums.

e

$.$

$$Industrial

$/$

economic growth, risk premiums, and a random error term.