Q1: Which of the following statements is true? a) The Capital Market Line prices efficient portfolios in terms of total risk. b) The Capital Market Line prices individual assets in terms of total risk. c) The Capital Market Line prices efficient portfolios in terms of market risk. d) The Capital Market Line prices individual assets in terms of market risk. Q2: The Capital Asset Pricing Model (CAPM) expresses the equilibrum expected return of an asset as a function of: a) The risk-free rate, alpha, and the expected market return b) The risk-free rate and the sensitivity of the stock to market and idiosyncratic risk. c) Alpha and the expected market return. d) The risk-free rate and the sensitivity of the stock to the market risk premium Q3: The NPV investment decision rule for mutually exclusive projects is to: a) Accept all projects that yield NPV>0. b) Accept the project that yields the lowest NPV as this minimizes risk taken by the c) Accept the project that yields the highest NPV as this is consistent with the objective of a firm. d) Accept the project that the manager prefers to choose due to expertise in certain aspects of the project Q4: A firm undertakes a risky project that costs 600,000 and generates cashflows of 250,000 per annum for the next 5 years. What is the Payback of the project? a) 2. 2 years b) 2.3 years c) 2.4 years d) 2.5 years Q5: Using a discount rate of 10% the modified payback of the project in Q4 is: a) 2.88 years b) 2.68 years c) 2.48 years d) 2.58 years firm