finance for decision making In the capital asset pricing model, the beta coeffic
ID: 2630749 • Letter: F
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finance for decision making
In the capital asset pricing model, the beta coefficient is a measure of risk and an index of the degree of movement of an asset's return in response to a change in . diversifiable; the bond index rate diversifiable; the market rate non-diversifiable; the market return non-diversifiable; the Treasury Bill rate The Capital Asset Pricing Model(CAPM) shows that the expected return for an asset depends on three things: the pure time value of money the reward for bearing idiosyncratic risk the amount of systematic risk the reward for bearing systematic risk the reward for merely waiting for your money, without taking any risk I, III and V I, III and IV II, III and IV III, IV and V II, IV and V The relationship between the yield to maturity and the length to maturity is known as the: repayment structure of interest rates. term structure of interest rates. risk structure of interest rates. tax structure of interest rates. A firm with a cost of capital of 13 per cent is evaluating three capital projects. The internal rates of return are as follows: Project IRR 12% 15% 13% The firm should: accept Projects 2 and 3 and reject Project 1. accept Project 3 and reject Projects 1 and 2. accept Project 1 and reject Projects 2 and 3. accept Project 2 and reject Projects 1 and 3. accept allExplanation / Answer
26. Choice c. non-diversifiable and the market return
28. D. III, IV and V
30. B. Term Structure of interest rates. (also called Yield Curve)
31. D. Accept project 2 and reject Projects 1 and 3.
The company will only accept projects which are greater than IRR. At IRR also, the net cash flow is 0 so project 3 will also be rejected.
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