True (T) or False (F): 44 points (4 points each). Please use "T" or "F" to answer. 1. Accounting profits are the most relevant variable the financial manager uses to measure returns. 2. A return of 1% compounded monthly is the same as an annual rate of 12%. 3. At an annual interest rate of 6% an initial sum of money will double approximately every 12 years. 4. The price of a dishwasher today is $500 and inflation is 10% per year. Therefore, in 3 years the price of the dishwasher will be $650. 5. The total amount of interest earned on a lump sum investment will exactly double if the amount of time is exactly doubled, everything else equal. 6. An example of an annuity is the interest received from bonds. 7. The future value of an annuity will increase if the interest rate goes up, but the Present value of the same annuity will decrease as the interest rate goes up. 8. The benefits of diversification occur as long as the investments in a portfolio are not perfectly positively correlated. 9. Diversifying among different kinds of assets is called asset allocation. 10. Stock A has an expected return of 12% with a standard deviation of 5%. Therefore, if returns are normally distributed, approximately two-thirds of the time the actual return will be between 7% and 17%. 11. The required rate of return for an asset is equal to the risk-free rate plus a risk premium