1

Which of the following statements is CORRECT?

	a.	The present value of an investment drops as the discount rate increases.
	b.	The present value of the annuity increases if an ordinary annuity in total of $100,000 lasts for 10 years rather than 5 years, hence that each payment is for $10,000 rather than for $20,000 per year.
	c.	The present value of an investment drops if the total amount of the investments cash flows remains the same, but more of the cash flows are received in the earlier years and less are received in the later years.
	d.	The present value of an investment increases if the riskiness of the investment's cash flows increases.

2

Assume that the risk-free rate is 3% and the expected return on the market is 8.5%. What is the required rate of return on a stock with a beta of 1.3?

o 7.15% a. 14.05% b. 11.0596 . d. 10.15% O d