Practice problems

1) According to the NPV rule, all projects should be accepted if NPV is positive when discounted at the: 1) A) risk-free interest rate. B) opportunity cost of capital. C) accounting rate of return. D) internal rate of return. 2) Although Standard and Poor's Composite Index contains a limited number of U.S. publicly traded stocks, the Index represents: 2) A) all stocks priced at $50 a share or more. B) all stocks in the industrial sector. C) approximately 80% of U.S. stocks traded, in market value. D) approximately 60% of U.S. stocks traded, in market value. 3) If a project costs $72,000 and returns $18,500 per year for 5 years, what is its IRR? 3) A) 7.67% B) 8.50% C) 8.98% D) 7.39% 4) An investor divides her portfolio into three equal parts, with one part in Treasury bills, one part in a market index, and one part in a mutual fund with beta of 1.50. What is the beta of the investor's overall portfolio? 4) A) 1.25 B) 1.17 C) 0.83 D) 1.00