Which decision is an example of an ethical dilemma that a financial manager might encounter? O Selecting between two third-party auditors that are both unrelated to the company and highly respected O Determining whether to report earnings according to international accounting standards in addition to generally accepted accounting principles (GAAP) already used in published reports O Choosing whether to mail annual reports to shareholders in addition to posting the information on/"e for them to see O Determining whether to change the way depreciation expense is recognized to make earnings look higher for an upcoming sale of equity 233PN Mei is considering making an investment in Alliah Company stock. Because the stock is riskier than the return she could earn by investing in risk-free assets such as Treasury bonds, she requires a higher rate of return- an additional 5%. What does this additional 5% return represent? O Risk premium O Nominal interest rate o interest risk O Real interest rate a Tasks A company is choosing between several similar projects with the same risk level. If the company wants to maximize the value it will create for shareholders, which project should it choose? A project that provides a return significantly higher than the Mardle rate O A project that provides a lower return on investment than the firm's chosen discount rate o A project in which the required return by investors is higher than the potential return on investment O A project in which the opportunity cost is much greater than the potential returns - 100% 256 PM 29 Sunday 7 Why are investors compensated with interest? O Because it is unethical for firms to retain profits generated by investments, so they must disburse any profit to investors in the form of interest O Because the SEC requires that investors be compensated to meet legal requirements O Because inteligst is a form of wages that a firm must pay to anyone who invests in the firm Because investors incur opportunity costs, take on risk and lose purchasing power due to inflation How should the return on an investment be expressed to investors so they can analyze the data about the investment? 0 As an annualized percentage o As basis points o As the holdirim period return o As an expected return maintain the Tasks A portfolio manager wants to increase or maintain the returns of his clients while mitigating their risk What would be an appropriate decision for the portfolio manager to achieve this goal? Transfer all investments to stocks in the industry with the most growth Move all investments to the United States where companies are more stable O Purchase stocks that are similar and positiey correlated with one another Avoid risk by not choosing investments he deems to be too risky Sund ar 8) An individual is considering investing in a software company that provides 5% potential interest to shareholders. A What does the potential interest of 5% on this investment represent? Standard deviation Expected return Historical return O Risk to a high-yield savings Tasks As a child, an individual put $100 into a high-yield savings account and never removed or added to the money. The account now contains $150. What represents the return provided by the investment over time? The original value invested in the account (5100) The sum of the current and original balances ($250) The total amount of money currently in the account ($150) O The amount of money greater than the original amount invested (550) 287 AM o Sunday