1. A good way to reduce macro risk in a stock portfolio is to invest in stocks that:
a. have only specific risks. b. have diversified away the macro risk.
c. have low exposure to business cycles. d. pay guaranteed dividends.
2. What is the most likely explanation for a +20.0% return on a stock with a beta of 1.0 in a month when the market
a. The stock is aggressive. b. The market is undervalued.
c. Favorable firm-specific news was reported. d. The beta is really less than 1.0.
3. A project requires an investment of $10 million and offers an annual after-tax cash flow of $1,250,000 indefinitely. If the
firm's WACC is 12.5% and the project is riskier than the firm’s average projects, should it be accepted%?
a. Yes, since the project's NPV is positive.
b. Yes, since a zero NPV indicates marginal acceptability.
c. No, since the project's NPV is zero.
d. No, since the project's NPV is negative.