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Which of the following statements is CORRECT? a. If a project has normal cash flows, then its IRR must be positive. b. If a p
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Answer #1

V. Answer d

If a project has nonorm cash flow it will have two IRR in case the project has one or more negative cash flow followed by positive cash flows and only one negative cash flow at the end i.e. change in sign of cash flow happens twice from-ve to +ve and again form +ve to -ve

VI.

a. Incorrect. negative beta correlation means an investment moves in the opposite direction from the stock market.

b. Incorrect. Again negative beta of portfolio indicates inverse relation to the market

C. And d. Standard deviation can be used to measure the risk of stock or stock portfolio. Standard deviation measures the total risk with respect to the market. In a well diversified portfolio we can assume any specific risk has been diversified away so only measure systematic risk being taken. Therefore beta is a better measure of risk for well diversified portfolio

Answer. C

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