CTFA

CTFA practice questions, page 15 of 35, with answer review and explanations.

Question 71

Probability-tree analysis is best used when cash flows are expected to be:

  1. Independent over time
  2. Risk-free
  3. Related to the cash flows in previous periods
  4. Known with certainty

Question 72

You are considering two mutually exclusive investment proposals, project A and project B B's expected value of net present value is $1,000 less than that for A and A has less dispersion. On the basis of risk and return, you would say that

  1. Project A dominates project B
  2. Project B dominates project A
  3. Project A is more risky and should offer greater expected value
  4. Each project is high on one variable, so the two are basically equal

Question 73

If two projects are completely independent (or unrelated), the measure of correlation between them is:

  1. 0
  2. 0.5
  3. 1
  4. -1

Question 74

Managerial options can be viewed as:

  1. Methods for reducing agency risk through the use of incentives
  2. Methods for reducing total firm risk through diversification
  3. Strategies for increasing management compensation
  4. Opportunities for altering management decisions in the future

Question 75

Checkbook ledger:

  1. Is for informal use
  2. Is a booklet provided with a supply of check
  3. Used to maintain accurate record
  4. Both B and C are correct