1-If the fair value of a stock is greater than its market value, it means that: A. The stock has a low level of risk B. The stock offers a high dividend C. The market is undervaluing the stock. D. The market is overvaluing the stock

2-A profitability index of .85 for a project means that: A-The present value of benefits is 85% greater than the project's costs. B. The project's NPV is greater than zero. C. The project returns 85 cents in present value for each current dollar invested. D. The payback period is less than one year.

3-if the PI of a project is less than 1, its NPV should be less than 0. A. True B. False

4-In calculating the costs of sources of fund, the tax rate is important to which of the following source of fund? A. Common shares B. Retained earnings C. Bonds D. Preferred shares

5-The diversification effect on the portfolio is greatest when the correlation between assets is lowest. A. True B. False

6-Bonds are considered a riskier investment than common stock for investors. A. True B. False

7-Investors generally do not require a higher rate of return on bonds. A. True B. False