Question 1. (TCO 8) The historical returns on large-company

1. (TCO 8) The historical returns on large-company stocks, as reported by Ibbotson and Sinquefield, are based on: (Points : 3)
the largest 20 percent of the stocks traded on the NYSE.
the stocks of the largest 10 percent of the publicly traded firms in the U.S.
all of the stocks listed on the NYSE.
the stocks of the 500 companies included in the S&P 500 index.

Question 2. 2. (TCO 8) If the financial markets are efficient, then: (Points : 3)
stock prices should never change.
stock prices should only respond to unexpected news and events.
stock prices should increase or decrease slowly as new events are analyzed and the information is absorbed by the markets.
stock prices will only change when an event actually occurs, not at the time the event is anticipated.

Question 3. 3. (TCO 8) Which of the following statements is false regarding systematic risk? Select all that apply: (Points : 4)
is always diversifiable
is the total risk associated with surprise events
affects only a specific project or firm
is measured by standard deviation

Question 4. 4. (TCO 8) Assume a project that has the following returns for years 1 to 5: 15%, 4%, -13%, 34%, and 17%. What is the approximate expected return of this investment? (Points : 3)
11%
17%
16.60%
10%

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