The following chart shows return data of different indexes from 1925-2012. Rank

Question

The following chart shows return data of different indexes from 1925-2012. Rank the following returns in order of what each line represents: 6) $3221,536 2000-02:-20.45% 1987:-34%-30% $319,287 139,298 1968-74:-63 -37% $21,387 -$2042 $1283 1937-38:-72%-50% 25 1905 1945 1955 196 1975 195 1995 2005 2012 Year b) c) e) Red Line (53.221 MM): US Stocks US Stocks Small Cap Smal Cap Small Cap Stocks Stocks Stocks GlobalGlobal Corporate S&P; 500 Global Portfolio Portfolio Portfolio Bonds Corporate Inflation& 500 Global Blue Line: ($319K): Black Line: ($139K): S&P; 500 Portfolio Global CorporateInflation Portfolio Bonds vellow Une: (5213: Inflation Green Line: ($2,042): Fixed Purple Line: ($1,283): Treasury Inflation Treasury Index Inflation Treasury Corporate Bonds Income Income Inflation Treasury Bills Bills

Explanation / Answer

7. Even u am not sure if the question is asking about present Value or future value. I think question has some printing error.

8. In case of ranking conflict. The project with higher npv should be selected. Option (C)

9. (C). Shorter Payback period

10. Discounted payback period is better than simple pbp. Because it take into account actual value of cash flows.

Option C.

11. (B). Higher discount leads to lower terminal value.

12. (B) if both the projects are independent and have positive npv, both the projects should be selected.

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