Question

12) Stock HOWDY plans to pay a 52 dividend et yea,a3 divdend in yer d 54 in y 3 The dividends are expected to grow at 2% foreve afer year S The discount eae in 20 How d company can choose not to pay the dividend nest year ad eivest The st of dhe divdendswi remain the same. If the company chooses not to pay the 2 dividend nevt year, they can i and give you a special dividend of S45 in year 6 in addition to evpected dividends Shold dhe company reinvest? A) Do not reinvest because the stock price will be 50.16 we B) Do not reinvest becaues the stock price will be 2 lower C) Reinvest because the stock price will be $2 higher D) Reinvest because the stock price will be 50.16 higher 13) Which of the following statements is most correct concerning diversification and fisk? A) Risk-averse investors often select portiolios that include only companies from the same industry group because the familiarity reduces the risk B) Only wealthy investors can several stocks to gain the benefits of diversification. diversify their portfolios because a portfolio must contain at ea C) Proper diversification generally results in the elimination of all risk. D) Risk-averse investors often choose companies from different industries for their portiolios because the correlation of returns is less than if companies came from the same industry 14) Investment A has the following returns for various states of the economy State Recession 14 Probability 10% Investment A's Return -30 % Below Average Average Above Average 20% -5 % 40% 8% 25% 25% 5% 50% Boom Investment A's standard deviation of returns is: D) 20% C) 14.6% B) 3.4% A) 18.4% 15) 15) Which of the following statement is most correct? A) If you invest in the market portfolio, you are exposed to no unsystematic risk. B) Risk-free assets have a standard deviation of zero. higher expected return than Stock B, Stock A must also have a higher C) If Stock A has an standard deviation than Stock B. D) Ford Motor's stock should have a higher standard deviation than Walmart's stock 16) Changes in the general economy, like changes in interest rates represent what type of risk? B) unsystematic risk D) company-unique risk A) market risk C) diversifiable risk

financial management

Answer 1

Q12: Some Part of the Question is not clear. hence as Per visibility the option B is the Correct Answer.

Ans: B

Q13: Option C is the Answer

Explanation: Diversification and risk is the process of having good portfolio. hence diversification leads to elimination of all risk not fully.

Q14: Option D is the Answer

Q15: Option B is the Correct answer

Expalnation: The risk free Assets has the same return in all states of the world. thus the Standard deviation of the Risk-free return is Zero.

Q16: Option A is the correct answer.

Interest Rate changes leads to market so it is a type of Market Risk