FINA 3000 POPE UGA TEST 2 EXAM
LATEST VERSION 2025 WITH UPDATED
QUESTIONS AND CORRECT DETAILED
ANSWERS
T/F: A stock with a beta of 1 has the same relevant risk as the market portfolio. -
ANSWERTrue
T/F: Market risk and systematic risk describe the same portion of volatility. -
ANSWERTrue
T/F: The greater the correlation between a stock's returns and returns on the market
portfolio, the greater the beta. - ANSWERTrue
T/F: If a stock's actual return plots above the security market line, we say the stock is
overvalued. - ANSWERFalse; it's undervalued
T/F: A large weakness of the payback method is that it ignores the time value of money.
- ANSWERTrue
T/F: The largest weakness of the CAPM model is that finding a true risk-free rate is
impossible. - ANSWERFalse
what is a major weakness of the finite stock pricing model? - ANSWERthat you assume
the future selling price
T/F: the coefficient of variation is the risk taken per unit of return - ANSWERTrue
T/F: as assets are added to a portfolio, the importance of covariance decreases -
ANSWERfalse
T/F: for contingent projects, all projects are rejected if ANY of the other projects have a
negative NPV - ANSWERFalse
only reject all projects if the total NPV is negative
T/F: the slope of the security market line is beta - ANSWERFalse
the x axis is beta and the slope is the required return
LATEST VERSION 2025 WITH UPDATED
QUESTIONS AND CORRECT DETAILED
ANSWERS
T/F: A stock with a beta of 1 has the same relevant risk as the market portfolio. -
ANSWERTrue
T/F: Market risk and systematic risk describe the same portion of volatility. -
ANSWERTrue
T/F: The greater the correlation between a stock's returns and returns on the market
portfolio, the greater the beta. - ANSWERTrue
T/F: If a stock's actual return plots above the security market line, we say the stock is
overvalued. - ANSWERFalse; it's undervalued
T/F: A large weakness of the payback method is that it ignores the time value of money.
- ANSWERTrue
T/F: The largest weakness of the CAPM model is that finding a true risk-free rate is
impossible. - ANSWERFalse
what is a major weakness of the finite stock pricing model? - ANSWERthat you assume
the future selling price
T/F: the coefficient of variation is the risk taken per unit of return - ANSWERTrue
T/F: as assets are added to a portfolio, the importance of covariance decreases -
ANSWERfalse
T/F: for contingent projects, all projects are rejected if ANY of the other projects have a
negative NPV - ANSWERFalse
only reject all projects if the total NPV is negative
T/F: the slope of the security market line is beta - ANSWERFalse
the x axis is beta and the slope is the required return
