Question

Which of the following statements is true?

a. Deciding whether or not to open a new store is part of the process known as capital structure.

b. The mix of debt and equity by which a corporation is financed refers to the firm's Cash management.

c. Deciding if a new project should be accepted is a working capital decision.

d. None of the above.

Which of the following statements is true?

a. Higher quarterly loss than expected for Air Canada is considered an example of systematic risk.

b. An increasing uncertainty about the GDP growth rate is an example of systematic risk.

c. Non-diversifiable risk is measured by standard deviation.

d. The risk premium increases as the unique risk increases.

e. None of the above.

Which of the following is the best definition for the concept of efficient capital market?

a. The investor will receive the correct return if he or she holds a diversified portfolio of stocks and bonds.

b. The prices of assets reflect available information and adjust quickly when new information arrives.

c. The expected return of a given asset has a symmetric, bell-shaped frequency probability distribution that can be defined by its mean and standard deviation.

d. Asset prices are based on geometric average and compound average growth rates because compounding is taken into account with perfect precision.

e. None of the above.

Answer 1

Q1:

Option D: None of the above

Capital structure is considered as mix of debt and equity, deciding a new project is accepted or not is capital budgeting decision, and cash management is the process of managing cash flow from operations , investing and financing.

Q2;

Option B: An increasing uncertainty about the GDP growth rate is an example of systematic risk.

All the others are not correct

Q3:

Option B; The prices of assets reflect available information and adjust quickly when new information arrives.

Efficient market hypothesis states that all the available informations are reflected in prices and it is impossible to beat the market in long run. Based on small variations, there are Strong, Weak and Semi weak efficient market hypothesis.