Question
Use the information for the question below. Project A Project B Time 0 -$8,000 -$10,000 Time 1 $5,000 $5,000 Time 2 $3,000 $5,000 Time 3
Use the information for the question below.
| Project A | Project B | |
| Time 0 | -$8,000 | -$10,000 |
| Time 1 | $5,000 | $5,000 |
| Time 2 | $3,000 | $5,000 |
| Time 3 | $3,000 | $10,000 |
If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or Project B) will WiseGuy Inc. prefer?
| A. | Project A and Project B have the same ranking. | |
| B. | Project A | |
| C. | Cannot calculate a payback period without a discount rate. | |
| D. | Project B |
When we combine stocks in a portfolio, the amount of risk that is eliminated depends on the degree to which the stocks are correlated with one another.
True
False
Consider the following annual returns for Vanguard 500 Index Fund Investor Shares (VFINX)
| 2005 | 2006 | 2007 | 2008 |
| 10% | -10% | 15% | -15% |
Calculate the geometric average annual return over this period.
| A. | -2.82% | |
| B. | 1.55% | |
| C. | 0.26% | |
| D. | -0.82% |
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Financial Markets And Institutions
Authors: Anthony Saunders, Marcia Millon Cornett
1st International Edition
0071181334, 9780071181334
