According to the theory of the Capital Asset Pricing Model (CAPM), total risk can be broken into two components, systematic risk and idiosyncratic risk. Which of the following events would be considered a systematic, undiversifiable event according to the theory of the CAPM?

The following is the Dividend Discount Model (DDM) used to price stocks:

###P_0=\dfrac{C_1}{r-g}###

If the assumptions of the DDM hold, which one of the following statements is **NOT** correct? The long term expected:

A project has the following cash flows:

Project Cash Flows | |

Time (yrs) | Cash flow ($) |

0 | -90 |

1 | 30 |

2 | 105 |

The required return of a project is 10%, given as an effective annual rate. Assume that the cash flows shown in the table are paid all at once at the given point in time.

What is the Profitability Index (PI) of the project?

You have $**100,000** in the bank. The bank pays interest at **10**% pa, given as an effective annual rate.

You wish to consume **half** as much now (t=0) as in one year (t=1) and have nothing left in the bank at the end.

How much can you consume at time zero and one? The answer choices are given in the same order.

The efficient markets hypothesis (EMH) and no-arbitrage pricing theory is most closely related to which of the following concepts?

**Question 740** real and nominal returns and cash flows, DDM, inflation

Taking inflation into account when using the DDM can be hard. Which of the following formulas will **NOT** give a company's current stock price ##(P_0)##? Assume that the annual dividend was just paid ##(C_0)##, and the next dividend will be paid in one year ##(C_1)##.

A firm wishes to raise $**50** million now. They will issue **7**% pa semi-annual coupon bonds that will mature in **6** years and have a face value of $**100** each. Bond yields are **5**% pa, given as an APR compounding every 6 months, and the yield curve is flat.

How many bonds should the firm issue?

**Question 771** debt terminology, interest expense, interest tax shield, credit risk, no explanation

You deposit money into a bank account. Which of the following statements about this deposit is **NOT** correct?

**Question 920** SML, CAPM, Sharpe ratio, Treynor ratio, Jensens alpha, no explanation

Over-priced assets should **NOT**: