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TOPIC 2

f.yafai 7 questions Updated 19 Feb 2016

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Questions in this quiz (7)

  1. 1Which of the following would be the BEST motivator for outsourcing information technology (IT) systems?
    1. AInternal IT resources are stretched
    2. BIT is regarded as a core strategic need
    3. CThere is high risk of compromising confidentiality of information held on the IT system.
    4. DThere is high risk of the cost of systems maintenance compromising other business objectives.
  2. 2Reducing risk without any impact on business cash flows is most likely to
    1. ADecrease investors' required rate of return
    2. BDecrease the Enterprise Value
    3. CDecrease the PV of expected future business cash flows
    4. DIncrease the cost of capital
  3. 3Under CAPM, diversifiable risk: ( two answers )
    1. AIs also referred to as systematic risk. (systematic risk: affect all sectors)
    2. BIs a sector-specific but NOT firm-specific
    3. CIs unavoidable for most businesses
    4. DAffects share prices
  4. 4Which of the following statements is true?
    1. ARisk seeking investors expect a positive correlation between risk and expected return.
    2. BRisk is an inevitable result of being in business
    3. CMinimising all risk should be a key objective for all firms
  5. 5For a retail company, the possible loss of sales due to heavy snow forecast next week is best described as:
    1. ARisk
    2. BVolatility
    3. CUncertainty
    4. DPre-transactio exposure
  6. 6Lower borrowing interest costs will usually be achieved by:
    1. AIncreasing gearing
    2. BAccepting restrictive loan covenants
    3. CBootstrapping
    4. DActively pursuing riskier business rather than higher return
    5. EMaking a special dividend payment
  7. 7The average risk free interest is 2%. The FTSE world index returned minus1% last year, and similar poor equity returns are forecast for the coming year. Over the longer term, it is expected that the market risk premium will be 6%.
    A company has a beta of one. Under CAPM, the company's cost of equity is?
    1. AMinus 1%
    2. B1%
    3. C3%
    4. D3.5%
    5. E8%

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Description
FRM FRM Quiz on TOPIC 2, created by f.yafai on 26/10/2013.
Author
f.yafai
Language
English
Views
26
History
Created on 26 Oct 2013 · updated on 19 Feb 2016
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frmfrm
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