47. The capital market line ____________________.

Select one:

a. provides the same risk-return information than the characteristic line.

b. illustrates the risk-return relationship between risky securities and their betas.

c. illustrates the risk-return relationship between portfolios in the efficient frontier and borrowing or lending at the risk free rate.

d. illustrates the risk-return relationship between the optimal risky portfolio and borrowing or lending at the risk free rate.

48. The best method to use in deciding between mutually exclusive projects with equal useful life is ___________.

Select one:

a. the Profitability Index

b. the NPV

c. all of THESE

d. the IRR

49. The equivalent annual cost rules is better than other capital budgeting rules in choosing among mutually exclusive projects with unequal lives.

True or false

50. If an investment pays an annual rate of 6% compounded monthly, then the quarterly interest rate is 1.5%.

True or false

51. Which of the following statements is true?

Select one:

a. An advantage of the average accounting return rule is that the accounting information is usually available.

b. All of THESE

c. The pay-back period can be used when companies want to recuperate as quickly as possible the initial cost of an investment.

d. When a project has more than one sign change in the cash flows, the IRR rule may produce multiple IRRs.

52. The Canadian and U.S. stock markets are more integrated than the Canadian and Japanese stock markets.

True or false

53. Treasure stock increases when a company repurchase its own outstanding shares

True or false

54. A stock with a beta of 0.8 indicates that if the return on the market increases by 1%, then the return on the stock would increase by 0.8%.

True or false

55. At the beginning of 2019, Valentina invested in a stock with a share price of $100. She received a cash dividend of $2 per share at the end of the year. If the total return obtained was 2%, then the share price at the end of the year was __________.

Select one:

a. $100

b. $104

c. None of THESE

d. $102

56. Which of the following statements is not true?

Select one:

a. Retirement of long term bonds increases the cash flow to bondholders.

b. Additions to net working capital decrease the cash flow of the firm

c. Depreciation increases the cash flow of the firm.

d. Repurchase of own company share increases the cash flow to shareholders.

e. All of THESE are true

57. Capital budgeting projects should include opportunity costs.

True or false

58. An example of a long term asset is companys copyrights.

True or false

59. Historical evidence shows that the risk premium of Canadian bonds is less than the risk premium of Canadian stocks.

True or false

60. Stock A has an expected return of 20%, and stock B has an expected return of 4%. However, the risk of stock A as measured by its variance is 2 times that of stock B. If the two stocks are combined equally in a portfolio, what is the portfolio's expected return?

Select one:

a. 4%

b. 12%

c. 20%

d. Greater than 20%

e. None of THESE