(Appendix 13A)The Following Data Pertain to an Investment

question 92

Multiple Choice

(Appendix 13A) The following data pertain to an investment:
What is the net present value of the proposed investment? (Ignore income taxes in this problem. ) (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

• A) ($3,430).
• B) $0.
• C) $620.
• D) $3,355.

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Definitions:

Market Risk

The risk of losses due to factors that affect an entire market or asset class, also known as systematic risk, which cannot be eliminated through diversification.

Interest Rate Risk

The potential for investment losses resulting from changes in interest rates.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks; it is used to determine a theoretically appropriate required rate of return of an asset.

Specific Risk

Risk associated with individual investments or a small group of assets, distinct from market risk.