Corporate Finance
Assignment#1
Note: Multiple choice questions have only one correct answer
1. If you have a portfolio of two risky stocks which turns out to have no diversification benefits.
The reason you have no diversification is:
A) the returns are too...
More
Corporate Finance
Assignment#1
Note: Multiple choice questions have only one correct answer
1. If you have a portfolio of two risky stocks which turns out to have no diversification benefits.
The reason you have no diversification is:
A) the returns are too small
B) the returns move perfectly opposite of one another
C) the returns are too large to offset
D) the returns move perfectly with one another
E) the returns are completely unrelated to one another
Answer: E) the returns are completely unrelated to one another
As the returns are unrelated, there is no need of diversification.
2. The problem of using the firm’s overall beta in computing the discount rate to use for discounting
projects of different risk is
A) the firm would accept too many high risk projects
B) the firm would reject too many low risk projects
C) the firm would reject too many high risk projects
D) the firm would accept too many low risk projects
E) none of the above
F) both (C ) & (D) could be correct
G) both (A)
Less
