T or F - Other things held constant, an increase in the discount rate of a stock
ID: 2756693 • Letter: T
Question
T or F - Other things held constant, an increase in the discount rate of a stock will result in an increase in its price.
T or F - Other things held constant, a decrease in the cost of capital will result in an increase in a project's payback period.
T or F - Short-term financing may be riskier than long-term financing since, during periods of tight credit, the firm may not be able to rollover (renew) its debt.
T or F - All other things equal, for a given percentage change in the discount rate on a bond, the price of the bond will change by a greater percentage the shorter its maturity.
T or F - Holders of well-diversified portfolios can ignore systematic risk.
T or F - If the NPV of a project is positive, the IRR of the project is always greater than the discount rate.
Explanation / Answer
Other things held constant, an increase in the discount rate of a stock will result in an increase in its price.- true
Other things held constant, a decrease in the cost of capital will result in an increase in a project's payback period. - True
Short-term financing may be riskier than long-term financing since, during periods of tight credit, the firm may not be able to rollover (renew) its debt. - True
All other things equal, for a given percentage change in the discount rate on a bond, the price of the bond will change by a greater percentage the shorter its maturity. - True
Holders of well-diversified portfolios can ignore systematic risk - False
If the NPV of a project is positive, the IRR of the project is always greater than the discount rate.-True
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