MGT201 Quiz # 3

Question # 1 of 10 (

Start time: 09:41:19 AM

Which of the following costs would be considered a fixed cost?

Select correct option:

Raw materials

Depreciation

Bad-debt losses

Production labor

Question # 2 of 10 (

Start time: 09:42:53 AM

Expected Portfolio Return = ___________.

Select correct option:

rP * = xA rA + xB rB

rP * = xA rA - xB rB

rP * = xA rA / xB rB

rP * = xA rA * xB rB

Question # 3 of 10 (

Start time: 09:44:13 AM

Why markets and market returns fluctuate?

Select correct option:

Because of political factors

Because of social factors

Because of socio-political factors

Because of macro systematic factors

Question # 4 of 10 (

Start time: 09:45:39 AM

Which of the following can be used to calculate the risk of the larger portfolio?

Select correct option:

Standard deviation

EPS approach

Matrix approach

Gordon’s Approach

Question # 5 of 10 (

Start time: 09:46:36 AM

Which of the following market in finance is referred to the market for short-term government and corporate debt securities?

Select correct option:

Money market

Capital market

Primary market

Secondary market

Question # 6 of 10 (

Start time: 09:47:51 AM

Which of the following would be considered a cash-flow item from an "operating" activity?

Select correct option:

Cash outflow to the government for taxes

Cash outflow to shareholders as dividends

Cash inflow to the firm from selling new common equity shares

Cash outflow to purchase bonds issued by another company

Question # 8 of 10 (

Start time: 09:50:34 AM

A 5-year annuity due has periodic cash flows of Rs.100 each year. If the interest rate is 8 percent, the present value of this annuity is closest to which of the following equations?

Select correct option:

           

(Rs.100)(PVIFA at 8% for 4 periods) + Rs.100

(Rs.100)(PVIFA at 8% for 4 periods)(1.08)

(Rs.100)(PVIFA at 8% for 6 periods) - Rs.100

Can not be found from the given information

Question # 9 of 10 (

Start time: 09:51:22 AM

Which of the following is correct regarding the opportunity cost of capital for a project?

Select correct option:

           

The opportunity cost of capital is the return that investors give up by investing in the project rather than in securities of equivalent risk.

Financial managers use the capital asset pricing model to estimate the opportunity cost of capital

The company cost of capital is the expected rate of return demanded by investors in a company

All of the given options

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MGT201 GDB

Your neighbor is a security analyst. He has conducted his research about some

stocks in Karachi Stock Exchange (KSE) and his findings are as follows:
Stock A will have a return of 18%, stock B will have a return of 20 % and stock C
will have a return of 22%, but his findings do not involve the CAPM (Capital
Asset Pricing Model).
You are a business graduate and when you have used CAPM, you have come to
Stock A’s expected return is 15.50%, Stock B’s expected return is 24.63% and
Stock C’s expected return is 25.39%.
In your opinion, whether the KSE has over-priced or under-priced each stock
and in the light of these results, which of these stocks are suitable for


Solution:


Stock A : 18% ------> 15.50%

Stock B : 20% ------> 24.63%

Stock C : 22% ------> 25.39%

for A KSE is over prized

for B, & C KSE has under prized.

In my opinion Stock A is more suitable for investment then B or

C. It has more return 18% then compared to 15.50%...

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