Assets are priced such that _____________________ increase with the riskiness of future payoffs. A) expected returns B) realized returns C) non-refundable returns D) regulated returns
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- This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value methodMake a simple example of the following: a. Capital Gain (or Losses) b. Expected Return c. Real Return d. Risk-free Return e. Required Return f. Holding Period ReturnIn a theoretical sense, the financial value of any asset is the present value of: Select one: A. Its past dividends B. Its expected cash flows C. Its expected sales price D. Its operating earnings
- The Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the risk-free rate plus a risk premium for: a. Volatility b. Systematic risk c. Non-systematic risk d. Diversification e. Marginal utility of consumptionWhich of the following statements describing the elements of intrinsic valuation is most accurate? A.) When the present value of the cashflows is discounted with the appropriate rate and this present value is positive, then the asset providing these cashflows has a value to the investor. B.) The risk-free rate is the lowest rate that an investor can earn from short-term investments. C.) Cashflows may include depreciation expenses and amortization costs. D.) A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best.a) Net Present Value (Present Worth); b) Internal Rate of Return (IRR);c) External Rate of Return (ERR);d) Simple Payback Period
- Which method does not consider the time value of money? Choose the correct. A. Net present value B. Internal Rate of Return C. Average rate of return D. Profitability IndexWhich of the following is the correct definition for present value (PV)? Select one: a. The current value of the sum of all the past cash flows given a specified rate of return. b. The current value of the sum of all the future profits made by the company with a specified rate of return. c. The current value of a future sum of money or stream of cash flows given a specified rate of return. d. The future value of the sum of all the future cash flows without a specified rate of return.Methods that ignore the time value of money in capital investment appraisal include which of the following? a. Net present valueb. Discounted payback c. Average rate of return d. All of the above
- Indicate which investments will plot on, above and below the SML? If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph.This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero. Group of answer choices A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value methodWhen adding real estate to an asset allocation program that currently includes only stocks, bonds, and cash, which of the properties of real estate returns affect portfolio risk? Explain.a. Standard deviation.b. Expected return.c. Correlation with returns of the other asset classes.