BFIN300 Final Test Questions with Correct Answers

BFIN300 Final Test Questions with Correct Answers An underlying assumption of the dividend growth model is that a stock is worth: - Answer-the present value of the future income which it generates The value of common stock today depends on: - Answer-the expected future dividends, capital gains, and discount rate. The constant dividend growth model is: - Answer-generally not used in practice because most stocks grow at a non-constant rate. The slope of an asset's security market line is the: - Answer-beta coefficient. Risk that affects a large number of assets, each to a greater or lesser degree, is called: - Answer-systematic risk The standard deviation of a portfolio will tend to increase when: - Answer-the portfolio concentration on a single cyclical industry increases A symmetric, bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the: - Answer-normal distribution The excess return required from a risky asset over that required from a risk-free asset is called the: - Answer-risk premium The risk premium is computed by: - Answer-subtracting the average return on the US treasury bill from the average return for the investment The relationship between nominal rates, real rates, and inflation is known as the - Answer-Fisher effect