Which of the Following Statements Is True with Respect to the Binomial

question 22

Multiple Choice

Which of the following statements is true with respect to the binomial distribution?

• A) The binomial distribution tends to be more symmetric as the probability of success p approaches 0.5.
• B) As the number of trials increase, the expected value of the random variable decreases.
• C) As the number of trials increase for a given probability of success, the binomial distribution becomes more skewed.
• D) The binomial distribution tends to be more symmetric as the probability of success p approaches 1.0.
• E) None of these.

Calculate appropriate hurdle rates using CAPM for capital budgeting decisions.

Understand the concept of beta and its relevance in measuring stock risk.

Differentiate between systematic and unsystematic risk.

Evaluate investment opportunities using the concept of underpricing and overpricing relative to the Security Market Line (SML).

---

Definitions:

Assets

Resources owned or controlled by a business or an individual that are expected to produce economic value or benefit in the future.

Leasing

Leasing is a financial agreement in which one party, the lessor, allows another party, the lessee, to use an asset for a specified period in exchange for periodic payments.

CCA Tax Shield

CCA Tax Shield refers to the reduction in income tax a business enjoys from being able to deduct the depreciation of tangible property over its useful life, under Canada's Capital Cost Allowance regulations.

Borrow Money

The act of obtaining funds from a lender under the agreement to pay back the principal amount along with interest or fees.