100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
FIN 470 Final Exam UPDATED Questions and CORRECT Answers $10.49
Add to cart
Quickly navigate to
Preview
  2.  
  3. FIN 470
  4.  
  5. FIN 470

Exam (elaborations)

FIN 470 Final Exam UPDATED Questions and CORRECT Answers
 0 purchase
  • Course
  • FIN 470
  • Institution
  • FIN 470

FIN 470 Final Exam UPDATED Questions and CORRECT Answers As a financial analyst, you are tasked with evaluating a capital-budgeting project. You were instructed to use the IRR method, and you need to determine an appropriate hurdle rate. The risk-free rate is 4%, and the expected market rate...

[Show more]

Preview 2 out of 13  pages

Document information

  • November 18, 2024
  • 13
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

Written for

  • FIN 470
  • FIN 470

Seller

avatar-seller
MGRADES

Reviews received

Content preview

FIN 470 Final Exam UPDATED Questions
and CORRECT Answers
As a financial analyst, you are tasked with evaluating a capital-budgeting project. You were
instructed to use the IRR method, and you need to determine an appropriate hurdle rate. The
risk-free rate is 4%, and the expected market rate of return is 11%. Your company has a beta
of 0.75, and the project that you are evaluating is considered to have risk equal to the average
project that the company has accepted in the past. According to CAPM, the appropriate
hurdle rate would be - CORRECT ANSWER✔✔- As per CAPM, expected return for the
company = risk free rate + beta *(market return - risk free rate) = 4% + .75*(11-4) = == 4% +
.75*(7) = 9.25%


As a financial analyst, you are tasked with evaluating a capital-budgeting project. You were
instructed to use the IRR method, and you need to determine an appropriate hurdle rate. The
risk-free rate is 3%, and the expected market rate of return is 11%. Your company has a beta
of 1.3, and the project that you are evaluating is considered to have risk equal to the average
project that the company has accepted in the past. According to CAPM, the appropriate
hurdle rate would be - CORRECT ANSWER✔✔- 13.4%.


You invest $200 in security A with a beta of 1.4 and $800 in security B with a beta of 0.3. The
beta of the resulting portfolio is - CORRECT ANSWER✔✔- (200*1.4)+(800*.3)/(200+800)
= 0.52


Standard deviation and beta both measure risk, but they are different in that beta measures -
CORRECT ANSWER✔✔- only systematic risk, while standard deviation is a measure of
total risk.


The capital asset pricing model assumes - CORRECT ANSWER✔✔- all investors are price
takers and have the same holding period.


According to the Capital Asset Pricing Model (CAPM), a well diversified portfolio's rate of
return is a function of - CORRECT ANSWER✔✔- beta risk.


According to the Capital Asset Pricing Model (CAPM), a well diversified portfolio's rate of
return is a function of - CORRECT ANSWER✔✔- market risk.

, In the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is -
CORRECT ANSWER✔✔- beta.


The risk-free rate and the expected market rate of return are 0.05 and 0.13, respectively.
According to the capital asset pricing model (CAPM), the expected rate of return on a
security with a beta of 1.1 is equal to - CORRECT ANSWER✔✔- 13.8%



An overpriced security will plot - CORRECT ANSWER✔✔- below the security market line.


You purchased a share of stock for $25. One year later, you received $1 as a dividend and
sold the share for $29. What was your holding-period return? - CORRECT ANSWER✔✔-
(29-25+1)/25 = 20%


Historical records regarding return on stocks, Treasury bonds, and Treasury bills between
1926 and 2018 show that - CORRECT ANSWER✔✔- stocks offered investors greater rates
of return than bonds and bills.


A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 5%.
What is your approximate annual real rate of return if the rate of inflation was 1.5% over the
year? - CORRECT ANSWER✔✔- 3.5%



Risk, Return, and Historical Record - CORRECT ANSWER✔✔- Question 4


You purchased a share of stock for $120. One year later, you received $1.82 as a dividend and
sold the share for $136. What was your holding-period return? - CORRECT ANSWER✔✔-
None of the options are correct.


Other things equal, an increase in the government budget deficit - CORRECT ANSWER✔✔-
drives the interest rate up.


Which of the following measures of risk best highlights the potential loss from extreme
negative returns? - CORRECT ANSWER✔✔- Value at risk (VaR)


Which of the following statement(s) is(are) true?

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller MGRADES. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $10.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

66184 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 15 years now

Start selling
$10.49
  • (0)
Add to cart
Added