Financial literacy

Which of the following statements is FALSE? A) The firm\'s weighted average cost

Which of the following statements is FALSE? A) The firm's weighted average cost of capital, denoted rwacc, is the cost of capital that reflects the risk of the overall business, w…

Which of the following statements is FALSE? A) The firm\'s weighted average cost

Which of the following statements is FALSE? A) The firm's weighted average cost of capital, denoted rwacc, is the cost of capital that reflects the risk of the overall business, w…

Which of the following statements is FALSE? A) The firm\'s weighted average cost

Which of the following statements is FALSE? A) The firm's weighted average cost of capital, denoted rwacc, is the cost of capital that reflects the risk of the overall business, w…

Which of the following statements is FALSE? A) The firm\'s weighted average cost

Which of the following statements is FALSE? A) The firm's weighted average cost of capital, denoted rwacc, is the cost of capital that reflects the risk of the overall business, w…

Which of the following statements is FALSE? A) The geometric average return is a

Which of the following statements is FALSE? A) The geometric average return is a better description of the long-run historical performance of an investment. B) The geometric avera…

Which of the following statements is FALSE? A) The geometric average return is a

Which of the following statements is FALSE? A) The geometric average return is a better description of the long-run historical performance of an investment. B) The geometric avera…

Which of the following statements is FALSE? A) The geometric average return is a

Which of the following statements is FALSE? A) The geometric average return is a better description of the long-run historical performance of an investment. B) The geometric avera…

Which of the following statements is FALSE? A) The more cash the firm uses to re

Which of the following statements is FALSE? A) The more cash the firm uses to repurchase shares, the less it has available to pay dividends. B) Free cash flow measures the cash ge…

Which of the following statements is FALSE? A) The more cash the firm uses to re

Which of the following statements is FALSE? A) The more cash the firm uses to repurchase shares, the less it has available to pay dividends. B) Free cash flow measures the cash ge…

Which of the following statements is FALSE? A) We must discount the cash flows f

Which of the following statements is FALSE? A) We must discount the cash flows from stock based on the equity cost of capital for the stock. B) The divided yield is the percentage…

Which of the following statements is FALSE? A) Without trading, the portfolio we

Which of the following statements is FALSE? A) Without trading, the portfolio weights will decrease for the stocks in the portfolio whose returns are above the overall portfolio r…

Which of the following statements is FALSE? A. Bid prices exceed ask prices. B.

Which of the following statements is FALSE? A. Bid prices exceed ask prices. B. On the floor of the NYSE, prior to 2005 market makers (known on the NYSE as specialists) matched bu…

Which of the following statements is FALSE? A. The firm\'s weighted average cost

Which of the following statements is FALSE? A. The firm's weighted average cost of capital denotes r WACC is the cost of capital that reflects the risk of the overall business, wh…

Which of the following statements is FALSE? A. The more cash the firm uses to re

Which of the following statements is FALSE? A. The more cash the firm uses to repurchase shares, the less it has available to pay dividends. B. Free cash flow measures the cash ge…

Which of the following statements is FALSE? A. U.S. Treasuries are never subject

Which of the following statements is FALSE? A. U.S. Treasuries are never subject to interest rate risk unless we select a maturity equal to our investment horizon. Many practition…

Which of the following statements is FALSE? A. with a positive amount invested i

Which of the following statements is FALSE? A. with a positive amount invested in each stock, the more the stocks move together and the higher their covariance or correlation, the…

Which of the following statements is FALSE? A.The book-to-market is the observat

Which of the following statements is FALSE? A.The book-to-market is the observation that firms with high book-to-market ratios have positive alphas. B.Portfolios with high market …

Which of the following statements is FALSE? Debt holders are not foolish—they re

Which of the following statements is FALSE? Debt holders are not foolish—they recognize that when the firm defaults, they will not be able to get the full value of the assets. As …

Which of the following statements is FALSE? Depreciation is not a cash expense p

Which of the following statements is FALSE? Depreciation is not a cash expense paid by the firm. Depreciation expenses have a positive impact on free cash flow. Depreciation expen…

Which of the following statements is FALSE? If the market portfolio is not effic

Which of the following statements is FALSE? If the market portfolio is not efficient, then a portfolio of small stocks will likely have positive alphas. Over the years since the d…

Which of the following statements is FALSE? If we can identify a comparison firm

Which of the following statements is FALSE? If we can identify a comparison firm whose assets have the same risk as the project being evaluated, and if the comparison firm is leve…

Which of the following statements is FALSE? O The dividend discount model values

Which of the following statements is FALSE? O The dividend discount model values the stock based on a forecast of the future dividends paid to shareholders. One assumption used to…

Which of the following statements is FALSE? Question 25 options: 1) In general,

Which of the following statements is FALSE? Question 25 options: 1) In general, the difference between the cost of capital and the internal rate of return (IRR) is the maximum amo…

Which of the following statements is FALSE? Question 6 options: A) Many projects

Which of the following statements is FALSE? Question 6 options: A) Many projects use a resource that the company already owns. B) When evaluating a capital budgeting decision, we …

Which of the following statements is FALSE? Question 6 options: A) The firm\'s w

Which of the following statements is FALSE? Question 6 options: A) The firm's weighted average cost of capital, denoted rwacc, is the cost of capital that reflects the risk of the…

Which of the following statements is FALSE? Question 9 options: A) The more cash

Which of the following statements is FALSE? Question 9 options: A) The more cash the firm uses to repurchase shares, the less it has available to pay dividends. B) Free cash flow …

Which of the following statements is FALSE? Select one: a. The lower the discoun

Which of the following statements is FALSE? Select one: a. The lower the discount percentage offered, the greater the cost of forgoing the discount and using trade credit. b. A fi…

Which of the following statements is FALSE? The dividend discount model values t

Which of the following statements is FALSE? The dividend discount model values the stock based on a forecast of the future dividends paid to shareholders. One assumption used to f…

Which of the following statements is FALSE? The payback period tends to ignore t

Which of the following statements is FALSE? The payback period tends to ignore the later cash flows. The payback period is useful as a rough measure of a project's liquidity. The …

Which of the following statements is FALSE? The payback period tends to ignore t

Which of the following statements is FALSE? The payback period tends to ignore the later cash flows. The payback period is useful as a rough measure of a project's liquidity. The …

Which of the following statements is FALSE? There may be reasons to exclude cert

Which of the following statements is FALSE? There may be reasons to exclude certain historical data as anomalous when estimating beta. If we use very old data to when estimating b…

Which of the following statements is FALSE? We need to know the cost of capital

Which of the following statements is FALSE? We need to know the cost of capital (WACC) in order to use the NPV rule. If the cost of capital (WACC) is less than the IRR, the NPV wi…

Which of the following statements is FALSE? We need to know the cost of capital

Which of the following statements is FALSE? We need to know the cost of capital (WACC) in order to use the NPV rule. If the cost of capital (WACC) is less than the IRR, the NPV wi…

Which of the following statements is FALSE? a We can estimate the value of a fir

Which of the following statements is FALSE? a We can estimate the value of a firm's shares by multiplying its current earnings per share by the average price-earnings ratio of com…

Which of the following statements is FALSE? a) Aggressive investors will invest

Which of the following statements is FALSE? a) Aggressive investors will invest more in the tangent portfolio choosing a portfolio that is near the tangent portfolio or even beyon…

Which of the following statements is FALSE? a) Because investors dislike only ne

Which of the following statements is FALSE? a) Because investors dislike only negative resolutions of uncertainty, alternative measures that focus solely on downside risk have bee…

Which of the following statements is FALSE? a.) The book-to-market is the observ

Which of the following statements is FALSE? a.) The book-to-market is the observation that firms with high book-to-market ratios have positive alphas. b.) If the market portfolio …

Which of the following statements is INCORRECT? a) The NYSE operates as an aucti

Which of the following statements is INCORRECT? a) The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market. b) Money market mutual funds usually in…

Which of the following statements is INCORRECT? a. An NPV profile graph shows ho

Which of the following statements is INCORRECT? a. An NPV profile graph shows how a project’s NPV varies as the cost of capital changes. b. Both NPV and IRR will not lead to confl…

Which of the following statements is MOST correct concerning diversification and

Which of the following statements is MOST correct concerning diversification and risk? A. Diversification is mainly achieved by the selection of individual securities for each typ…

Which of the following statements is MOST correct concerning diversification and

Which of the following statements is MOST correct concerning diversification and risk? A. Diversification is mainly achieved by the selection of individual securities for each typ…

Which of the following statements is NOT CORRECT, assuming positive interest rat

Which of the following statements is NOT CORRECT, assuming positive interest rates? Answer a. If an investment pays 10% interest compounded annually, its effective rate will also …

Which of the following statements is NOT CORRECT? 0 a. If a bond is selling at a

Which of the following statements is NOT CORRECT? 0 a. If a bond is selling at a premium, its current yield will be greater than its yield to maturity. b. If a bond is selling at …

Which of the following statements is NOT CORRECT? All else equal, bonds with lon

Which of the following statements is NOT CORRECT? All else equal, bonds with longer maturities have more interest rate (price) risk than bonds with shorter maturities. If a bond i…

Which of the following statements is NOT CORRECT? Answer Commercial paper can be

Which of the following statements is NOT CORRECT? Answer Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate. Accruals are…

Which of the following statements is NOT CORRECT? Answer Commercial paper can be

Which of the following statements is NOT CORRECT? Answer Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate. Accruals are…

Which of the following statements is NOT CORRECT? Select one: a. When stock in a

Which of the following statements is NOT CORRECT? Select one: a. When stock in a closely held corporation is offered to the public for the first time, the transaction is called “g…

Which of the following statements is NOT CORRECT? The corporate valuation model

Which of the following statements is NOT CORRECT? The corporate valuation model can be used both for companies that pay dividends and those that do not pay dividends. The corporat…

Which of the following statements is NOT CORRECT? The corporate valuation model

Which of the following statements is NOT CORRECT? The corporate valuation model discounts free cash flows by the required return on equity. The corporate valuation model can be us…

Which of the following statements is NOT CORRECT? The cost of capital used in ca

Which of the following statements is NOT CORRECT?      The cost of capital used in capital budgeting should reflect the average cost of the various types of capital a firm uses to…