ecaune shey are relevant at the fiewn level Crltically evaluste this statement tife. Will the project reach accounting cash, or financial treak-even point Brst? Which will it reach next? Last? will this onder always apply 14. How does sensitivity analysis interact with break-even analysis? S. Which has greater interest rate risk, a 30-year Treasury bond or a 30-year BB corporate bond? 16. U.S. Treasury bonds are not rated. Why? Often, junk bonds are not rated. Why't 17. A substantial percentage of the companies listed on the NYSE and the NASDAQ don't pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible given your answer to the previous question? 18. Is it unfiair or unethical for corporations t to create classes of stock with unequal voting rights? 19. Two years ago, General Materials' and Standard Fixtures' stock prices were the same. During the first year, General Materials' stock price increased by 10 percent while Standard stock price decreased by 10 percent. During the second year, General Materials Fixtures ; y 10 percent and Standard Fixtures' stock price increased by 10 percent. Do these two stocks have the same price today? Explain. 20. What is the difference between arithmetic and geometric returns? Suppose you have invested in a stock for the last 10 years. Which number is more important to you, the arithmetic or geometric return? 21. In broad terms, why is some risk diversifable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the leve of systematic risk? 22. True or false: The most important characteristic in determining the expected retur well-diversified portfolio is the variances of the individual assets in the portfolio. Explain. 3. Describe the difference between systematic risk and unsystematic risk. 38 2 ecaune shey are relevant at the fiewn level Crltically evaluste this statement tife. Will the project reach accounting cash, or financial treak-even point Brst? Which will it reach next? Last? will this onder always apply 14. How does sensitivity analysis interact with break-even analysis? S. Which has greater interest rate risk, a 30-year Treasury bond or a 30-year BB corporate bond? 16. U.S. Treasury bonds are not rated. Why? Often, junk bonds are not rated. Why't 17. A substantial percentage of the companies listed on the NYSE and the NASDAQ don't pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible given your answer to the previous question? 18. Is it unfiair or unethical for corporations t to create classes of stock with unequal voting rights? 19. Two years ago, General Materials' and Standard Fixtures' stock prices were the same. During the first year, General Materials' stock price increased by 10 percent while Standard stock price decreased by 10 percent. During the second year, General Materials Fixtures ; y 10 percent and Standard Fixtures' stock price increased by 10 percent. Do these two stocks have the same price today? Explain. 20. What is the difference between arithmetic and geometric returns? Suppose you have invested in a stock for the last 10 years. Which number is more important to you, the arithmetic or geometric return? 21. In broad terms, why is some risk diversifable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the leve of systematic risk? 22. True or false: The most important characteristic in determining the expected retur well-diversified portfolio is the variances of the individual assets in the portfolio. Explain. 3. Describe the difference between systematic risk and unsystematic risk. 38 2
