To Reduce Possible Conflicts of Interest, the Investment Company Act

question 155

Multiple Choice

To reduce possible conflicts of interest, the Investment Company Act requires that boards of directors:

• A) be composed entirely of outsiders
• B) be composed of at least 40% outsiders
• C) be composed of at least 20% outsiders
• D) be composed entirely of corporate managers
• E) hire corporate attorneys to advise them on possible issues of conflicts of interest

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Definitions:

Independent Projects

Projects within a financial or business context that do not affect each other's outcomes or viability.

Multiple IRR Projects

Investment projects that, due to their cash flow structure, yield more than one internal rate of return, complicating the investment decision.

Discounted Cash Flow

A valuation method used to estimate the attractiveness of an investment opportunity, by calculating the present value of expected future cash flows.

Discounted Payback

A capital budgeting method that calculates the amount of time needed to recoup an investment based on its discounted cash flows.