Question 1 According to the Capital Asset Pricing Model (CAPM) The relevant measure of a stock's risk is the standard deviation ofretums The stock's required rate of retum is a finction ofthe stock's uneystematic risk, and the curency risk premium. The stock's required rate of retum increases when the stock's systematic risk increases, holding all else constant. The market risk premium is positively related to the strength of the U.S. dollar Question 2 The present value of a single sum to be received in the future: Increases as the interest rate (discount rate) increases. Is unaffected when the interest rate (discount rate) changes Decreases as the interest rate (discount rate) increases. CIs a function of the mumber of compounding periods. Question 3 The primary goal of a publicly-owned firm interested in serving its stockholders should be to Maximize expected total corporate profit OMaximize expected EPS OMinimize the chances of losses OMaximize the shareholder wealth or stock price Question 4 Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT? NPV Net Present Value, WACC= Weighted Average Cost of Capital, IRR Internal Rate of Retum The project's NPV increases as the WACC declines The project's IRR is increases as the WACC declines The project's regular payback increases as the WACC declines The project's discounted payback increases as the WACC declines