Exhibit 66
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 12

Multiple Choice

Exhibit 6.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \mathbf { R } _ { \text {it } } & \mathbf { R } _ { \text {mt } } & \mathbf { a } _ { \mathbf { i } } & \text { Beta } \\\hline \mathrm { A } & 9.7 & 10.0 & 0 & 0.7 \\\mathrm {~B} & 10.4 & 8.0 & 0 & 1.4\end{array}$$ R_it = return for stock i during period t
R_mt = return for the aggregate market during period t
-Refer to Exhibit 6.6. Stock X had an actual return of 14% and Stock X's normal return based on the market's return for the same period was 13.6%. What is Stock X's abnormal rate of return?

• A)-0.4%
• B)0.1%
• C)0.4%
• D)4.0%
• E)6.4%

Analyze the impact of investment decisions on a company's financial health.

Understand the concept of the internal rate of return (IRR) and its application in investment evaluations.

Assess the significance of the payback period as a method for evaluating investment risk and return.

Identify and apply the profitability index to rank investment projects.

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Definitions:

Median Voter Theorem

A theory that suggests the outcome of a majority vote is most likely to match the preferences of the median voter.

Majority-Rule

A decision-making process that follows the principle that the opinions or preferences of more than half of the members of a group have the authority to make decisions binding on the whole group.

Median Voter

A theoretical concept in political science and economics suggesting that the outcome of a majority rule voting process will reflect the preferences of the median voter when preferences are single-peaked.

Decision Making

The cognitive process of selecting a course of action from among multiple alternatives.