Suppose Your Firm Is Considering Two Mutually Exclusive,required Projects with the Cash

question 86

Multiple Choice

Suppose your firm is considering two mutually exclusive,required projects with the cash flows shown as follows.The required rate of return on projects of both of their risk class is 8 percent,and the maximum allowable payback and discounted payback statistic for the projects are two and three years,respectively.
Use the MIRR decision rule to evaluate these projects; which one(s) should be accepted or rejected?

• A)Accept both A and B
• B)Accept neither A nor B
• C)Accept A, reject B
• D)Reject A, accept B

Calculate the standard deviation of returns on an active portfolio given its beta, the standard deviation of the market index, and its nonsystematic variance.

Describe the optimal weighting of securities within an active portfolio according to the Treynor-Black model.

Differentiate between a purely passive investment strategy and one that combines passive and active elements.

Use macroeconomic and composite forecasts to determine the optimal risky portfolio in the Treynor-Black model.

---

Definitions:

Formal Operational

The stage of cognitive development, according to Piaget, where individuals can think abstractly and systematically.

Assimilation

The cognitive process of fitting new information into pre-existing cognitive schemas, perceptions, and understanding.

Accommodation

The process of adapting or adjusting one's cognitive structures to incorporate new information from the environment.

Cognitive Development Theory

A theory that describes how thinking and reasoning develop through various stages over the course of a person's life.