#1: Based on a multifactorAPT model, the concept of portfolio diversification is to minimize which one of the following?

A. weighted average of betas F

B. weighted average of betas

C. weighted average of expected returns

D. weighted average of unsystematic risks

#2:If a security has a GNP beta of 1.5, then the security's total rate of return will: A. increase by 1.5 percent for every 1 percent decrease in GNP. B. change by an amount equal to the unexpected percentage change in GNP divided by a factor of 1.5. C. change by an amount equal to 1.5 times the percentage amount of any unexpected change in GNP. D. increase by 1.5 percent whenever the GNP increases by 1.5 percent.

#3: Leslie is charged with determining which small projects should be funded. Along with this assignment, she has been granted the use of $15,000 for a maximum of two years. She is considering three projects. Project A costs $7,500 and has cash flows of $4,000 a year for Years 1 to 3. Project B costs $8,000 and has cash flows of $3,000, $4,000, and $3,000 for Years 1 to 3, respectively. Project C costs $2,000 and has a cash inflow of $2,500 in Year 2. What decisions should she make regarding these projects if she assigns them a mandatory discount rate of 8.5 percent? Explain why. A. accept either Projects A and C or Projects B and C, but not all three as there is insufficient financing B. accept Project C and reject Projects A and B because only Project C has a discounted payback that is less than two years C. accept Projects A and C and reject Project B as they have the shortest discounted payback periods than fit within the $15,000 allocation D. accept Projects A and C and reject Project B as A and B payback within two years

#4. The only difference between Joe's and Moe's is that Moe's has old, fully depreciated equipment. Joe's just purchased all new equipment which will be depreciated over eight years. Assuming all else equal: A. Joe's will have a lower profit margin B. Moe's will have a lower profit margin C. Moe's will have a higher return on assets D. Joe's will have a lower return on equity.