1. THE CAPITAL ASSET PRICING MODEL ASSUMES INVESTORS ARE REWARDED FOR BEARING _________ RISK.

   		UNDIVERSIFIABLE
   		FIRM-SPECIFIC
   		DIVERSIFIABLE
   		UNSYSTEMATIC

1. CONSIDER THE CASH FLOWS FOR PROJECT Y SHOWN IN THE FOLLOWING TABLE:

   TIME	PROJECT Y
   0	-$500,000
   1	$300,000
   2	$300,000
   3	$300,000
   4	$300,000
   5	$200,000

   GIVEN A REQUIRED RETURN (AKA DISCOUNT RATE) OF 10%, THE PROFITABILITY INDEX FOR PROJECT Y IS ______. ACCORDING TO THE PROFITABILITY INDEX DECISION RULE THE PROJECT _________ BE ACCEPTED.

   		.75; SHOULD NOT
   		2.15; SHOULD
   		.58; SHOULD NOT
   		1.15; SHOULD

1. CONSIDER THE FOLLOWING INFORMATION FOR THE FIN 301 CORPORATION:

   STATE OF ECONOMY	PROBABILITY	RETURN
   DEPRESSION	.10	-25%
   AVERAGE	.80	12%
   BOOM	.10	30%

   FIN 301'S EXPECTED RETURN IS _______ AND ITS STANDARD DEVATION IS _______ AND ITS COEFFICIENT OF VARIATION IS ________.

   		10.1%; 13.85%; 1.37%
   		10.1%; 165.64%; 16.4%
   		10.1%; 12.87%; 1.27
   		10.1%; 11.29%; 1.12%

1. CONSIDER THE FOLLOWING STOCK RETURN INFORMATION FOR THE MARKET PORTFOLIO AND FOR THE FIN 301 CORPORATION:

   YEAR	CHANGE IN MARKET RETURN	CHANGE IN FIN 301 STOCK RETURN
   2013	10	12
   2012	8	12
   2011	2	6
   2010	-7	-12
   2009	5	2
   2008	19	30
   2007	4	-2
   2006	23	36
   2005	-15	-28
   2004	-6	-1

   IF THE RISK-FREE RATE IS 4% AND THE MARKET RISK PREMIUM IS 6%, THEN THE REQUIRED RETURN ON FIN 301 COMMON STOCK WOULD BE _________.

   		13.30%
   		11.95%
   		10.35%
   		12.75%

1. THE SLOPE OF THE SECURITY MARKET LINE JUST ROSE. THIS MUST MEAN________

   		SYSTEMATIC RISK JUST ROSE
   		INVESTORS JUST BECOME MORE RISK-AVERSE.
   		UNSYSTEMATIC RISK JUST ROSE.
   		INVESTORS EXPECT THE INFLATION RATE TO INCREASE.

1. CAPITAL BUDGETING PROJECTS A AND B ARE MUTUALLY EXCLUSIVE. AT A DISCOUNT RATE OF 0%, THE NPV OF PROJECT A EXCEEDS THAT OF PROJECT B. HOWEVER, THE IRR OF PROJECT B EXCEEDS THAT OF PROJECT A. USING ONLY THIS INFORMATION, WE CAN CONCLUDE _________.

   I. PROJECT A SHOULD BE SELECTED II. PROJECT B SHOULD BE SELECTED III. THE NPV PROFILES OF PROJECTS A AND B CROSS IV. THE NPV PROFILES OF PROJECTS A AND B DO NOT CROSS

   		II AND IV
   		IV ONLY
   		I AND III
   		III ONLY

1. CONSIDER THE FOLLOWING INFORMATION:

   SECURITY	BETA	REQUIRED RETURN
   RISK-FREE RATE	0	4%
   MARKET PORTFOLIO	1	10%
   FIN 301	1.5	?

   ACCORDING TO THE CAPITAL ASSET PRICING MODEL, THE REQUIRED RETURN FOR FIN 301 IS ________

   		10%
   		14.5%
   		16%
   		13%

1. BETA MEASURES A SECURITY'S _________

   		SYSTEMATIC RISK
   		FIRM-SPECIFIC RISK
   		UNSYSTEMATIC RISK
   		DIVERSIFIABLE RISK

1. THE JSU CORPORATION HAS A BETA OF 1.5. THIS MEANS THAT IF THE MARKET RETURN FALLS BY 6%, JSU'S RETURN SHOULD ______.

   		FALL BY 9%
   		FALL BY 10.5%
   		RISE BY 12%
   		RISE BY 9%

1. YOU LEARN THE H1N1 VIRUS HAS MUTATED INTO A FAR MORE VIRULENT FORM AND THERE IS NO KNOWN VACCINE OR CURE. ONE THIRD FOR THE WORLD'S POPULATION IS EXPECTED TO DIE FROM THE VIRUS. BASED ON THIS INFORMATION WE WOULD EXPECT _____________.

   		NO CHANGE IN THE SECURITY MARKET LINE.
   		THE SECURITY MARKET LINE TO SHIFT UP AND TO THE LEFT.
   		THE SLOPE OF THE SECURITY MARKET LINE TO STEEPEN.
   		THE SECURITY MARKET LINE TO SHIFT DOWN AND TO THE RIGHT.

1. YOU OBSERVE A SECURITY'S TOTAL RISK INCREASED BUT ITS BETA IS UNCHANGED. THIS MUST MEAN ITS ________ RISK JUST ROSE.

   		UNSYSTEMATIC
   		SYSTEMATIC
   		MARKET
   		UNDIVERSIFIABLE

1. THE STANDARD DEVIATION OF A SECURITY'S RETURNS IS A MEASURE OF ITS

   		TOTAL RISK
   		SYSTEMATIC RISK
   		UNSYSTEMATIC RISK
   		MARKET RISK

1. CONSIDER THE CASH FLOWS FOR PROJECT Y SHOWN IN THE FOLLOWING TABLE:

   TIME	PROJECT Y
   0	-$500,000
   1	$300,000
   2	$300,000
   3	$300,000
   4	$300,000
   5	$200,000

   THE PAYBACK PERIOD FOR PROJECT Y IS _________. IF MANAGEMENT'S MAXIMUM ALLOWABLE PAYBACK PERIOD IS 3 YEARS, THEN ACCORDING TO THE PAYBACK DECISION RULE THE PROJECT _______ BE ACCEPTED.

   		2.35; SHOULD
   		3.50; SHOULD NOT
   		3.72; SHOULD NOT
   		1.67; SHOULD