Which of the following methods is used to measure the standalone risk of a project?

• A) Sensitivity analysis
• B) Scenario analysis
• C) Simulation analysis
• D) All of the given options

What is the primary goal of an investor according to Portfolio Theory?

• A) To invest only in risk-free assets.
• B) To maximize returns for a given level of risk.
• C) To minimize risk regardless of returns.
• D) To avoid diversification.

Which of the following statements is not correct regarding Yield to Maturity (YTM)?

• A) YTM assumes that all bond coupons can be reinvested at the YTM rate
• B) YTM is the interest rate that makes the present value of a bond equal to its price
• C) All the given options
• D) YTM is the same as NPV on investment in the bond

What happens to the risk of a portfolio when two assets have a correlation coefficient of 0.0?

• A) The portfolio risk is the weighted average of the individual assets' risks.
• B) The portfolio risk is higher than the weighted average of the individual assets' risks.
• C) The portfolio risk is lower than the weighted average of the individual assets' risks.
• D) The portfolio risk cannot be determined.

Which of the following best describes the concept of "Mean Historical Return"?

• A) The return adjusted for inflation over a specific period.
• B) The return that investors expect to earn in the future.
• C) The guaranteed return on a risk-free investment.
• D) The average return earned on an investment over a specific period in the past.

What is the main challenge in estimating the inputs for portfolio theory?

• A) Calculating the correlation coefficient between two assets.
• B) Identifying the market portfolio.
• C) Accurately predicting future returns, variances, and covariances of assets.
• D) Determining the risk-free rate.

How does APT differ from CAPM in terms of risk factors?

• A) APT and CAPM are identical in their approach to measuring risk.
• B) APT does not consider systematic risk, while CAPM does.
• C) APT uses multiple factors to measure risk, while CAPM uses a single factor (beta).
• D) APT uses a single factor (beta) to measure risk, while CAPM uses multiple factors.

What does the term "g" represent in the Gordon Growth Model (GGM) formula?

• A) The company's beta.
• B) The expected constant growth rate of dividends.
• C) The market risk premium.
• D) The risk-free rate of return.

How is the country risk premium (CRP) incorporated into the Capital Asset Pricing Model (CAPM) for a project in a developing country?

• A) By multiplying the CRP by the project's beta in the CAPM formula.
• B) By dividing the CRP by the project's cost of debt in the CAPM formula.
• C) By adding the CRP to the market risk premium (MRP) in the CAPM formula.
• D) By subtracting the CRP from the risk-free rate in the CAPM formula.

Which of the following statements is correct regarding the operating lease?

• A) The lease term covers 50% of the asset’s useful economic life
• B) None of the given options
• C) The lease term covers 75% of the asset’s useful economic life
• D) The lease term covers 25% of the asset’s useful economic life

Why is the cost of preferred stock not adjusted for taxes, unlike the cost of debt?

• A) Preferred dividends are not tax-deductible for the company.
• B) Preferred stock is considered a form of equity.
• C) Preferred dividends are paid only once a year.
• D) Preferred stock has no maturity date.

Which of the following statements is correct regarding the Residual Income (RI) capital budgeting approach?

• A) All of the given options
• B) Residual Income (RI) focuses on the time value method
• C) Residual Income (RI) focus on returns to equity
• D) Residual Income (RI) focuses economic profit

Which of the following bonds is taken as safe & less sensitive to interest rate changes?

• A) Treasury bonds
• B) Corporate bonds
• C) Treasury bills
• D) Inverse floaters bonds

How can flotation costs be incorporated into the cost of external equity financing?

• A) By subtracting the flotation costs from the company's cost of debt.
• B) By adjusting the cost of equity formula to account for the flotation costs as a percentage of the share price.
• C) By adding the flotation costs to the risk-free rate in the CAPM formula.
• D) By ignoring flotation costs because they are insignificant.

Identify the classification of ratios as determinants of Bond Safety.

• A) Liquidity ratios
• B) Leverage ratios
• C) Coverage ratios
• D) All of the given options

Which of the following statements is true about the market portfolio in empirical tests of the CAPM?

• A) The market portfolio is always perfectly diversified.
• B) Proxies are used for the market portfolio because the true market portfolio is unobservable.
• C) The market portfolio includes only risk-free assets.
• D) The market portfolio is irrelevant for empirical tests.

Calculate the economic profit from the given information: Net operating profit= Rs. 2 million; Cost of capital= Rs0.5 million

• A) Economic Profit= Rs. 2.5 million
• B) None of the given options
• C) Economic Profit= Rs. 2 million
• D) Economic Profit= Rs.1.5 million

What does the Weak-form Efficient Market Hypothesis (EMH) state?

• A) Stock prices are influenced by insider trading.
• B) Stock prices reflect all historical market information, such as past prices and trading volumes.
• C) Stock prices reflect all public and private information.
• D) Stock prices adjust rapidly to new public information.

What is a "point estimate" in the context of expected rates of return?

• A) The return adjusted for inflation over a specific period.
• B) A range of possible returns for an investment.
• C) The most likely estimate of a single return for an investment with perfect certainty.
• D) The average return earned on an investment over multiple years.

Which of the following capital budgeting issues reveals the company's limited capital resources to undertake all positive net present value projects?

• A) Real cash flows
• B) Opportunity cost
• C) Capital rationing
• D) Nominal cash flows