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Quiz 5 Terms
Which of the following statements regarding capital budgeting is correct?
Capital budgeting is the process through which a firm decides if an investment is good or bad.
Which of the following is TRUE regarding the calculation of NPV (Net Present Value)?`
NPV uses Net Cash Flow in its calculation rather than Net Income
Which of the following is true about IRR as an investment rule?
Invest if IRR is greater than a predetermined rate of return.
Which of the following is true concerning the profitability index?
It is used to identify projects that will receive the best return associated with the amount of dollars invested.
Which of the following is true concerning the alpha of a portfolio
Alpha is a measure of how a stock performed relative to its expected performance.
Stocks that perform worse than their expected return will have a negative alpha.
Behavioral finance theorists assert that:
Investors are poorly informed and they tend to over or under react to news.
Investors hate to lose and hold on to bad investments longer than they should.
Which form of market efficiency states that stock prices reflect the information contained in the history of past stock prices and trading volume?
Which form of market efficiency states that stock prices reflect all information, including private information?
Which of the following asset classes generally possesses lowest risk compared to the others?
U.S. Treasury Bills