1) During an expansion, firms profits are higher and hence the dividends on their stocks are higher. How does this fact affect the price of their stocks?

a) Price goes up

b) Price goes down

c) Price remains unchanged

d) Not enough information to conclude

2) Lower P/E ratio indicates that

a) Earnings of the company is lower

b) Price paid for each dollar of earnings is higher

c) Earnings of the company is higher

d) Price paid for each dollar of earnings is lower

3) According to the Efficient Market Hypothesis, an expert cannot consistently beat the market because

a) Expert overestimates their own expertise

b) Anyone can tell if the price will increase or decrease in the next period

c) Prices reflect all available information so the expert does not have any information that is not reflected in the price

d) Experts can be irrational at times

4) If two projects have different size of initial investment, which measure is better to compare their value?

a) Net Present Value

b) Profitability Index

c) Payback Rule

d) Equivalent Annual Annuity