Question 1

An efficient portfolio is a project or a combination of investments that will involve the least risk for a given rate of return.

Accepted Answer

A) True 
 B)False  True

Question 2

For a normal distribution, the amount of the distribution that lies within plus or minus two standard deviations of the mean is approximately:

Accepted Answer

A)  68 percent. 
B)  95 percent. 
C)  98 percent. 
D)  99 percent. 
E)  64 percent. 
A)  68 percent. 
B)  95 percent. 
C)  98 percent. 
D)  99 percent. 
E)  64 percent. B

Question 3

An event set consists of all elementary events that satisfy a particular outcome.

Accepted Answer

A) True 
 B)False  True

Question 4

In probability analysis, the term "event" is used to designate an outcome.

Accepted Answer

A) True 
 B)False

Question 5

A risk-neutral investor is indifferent between two investments with the same expected return, regardless of their risk.

Accepted Answer

A) True 
 B)False

Question 6

Given the following data on two one period capital projects, calculate 1) the expected value of each project's cash flows and 2) the standard deviation of probable cash flows from each project. Indicate which of the two projects would be chosen by a risk-averse decision maker if their prices were the same and they had similar lives.

Accepted Answer

P R O J E C T A @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& Standard Deviation =

Question 7

Each event in a listing of all possible outcomes of a given situation is called a composite event.

Accepted Answer

A) True 
 B)False

Question 8

Use the following information to answer questions 10-12
A one year project has the following possible returns in relation to the percentage growth in personal income:   The management of Roller King has determined the following subjective probabilities concerning the percentage growth in personal income:  
-What is the variance of the inflows?

Accepted Answer

A)  21,250,00 
B)  31,250,000 
C)  41,250,000 
D)  51,250,000 
E)  none of the above 
A)  21,250,00 
B)  31,250,000 
C)  41,250,000 
D)  51,250,000 
E)  none of the above

Question 9

For a normal distribution, the amount of the distribution that lies within plus or minus one standard deviation of the mean is approximately:

Accepted Answer

A)  68 percent. 
B)  95 percent. 
C)  98 percent. 
D)  99 percent. 
E)  64 percent. 
A)  68 percent. 
B)  95 percent. 
C)  98 percent. 
D)  99 percent. 
E)  64 percent.

Question 10

In project analysis, the assumption usually made is that the decision maker is risk averse.

Accepted Answer

A) True 
 B)False

Question 11

A one year project has the following possible returns in relation to the percentage growth in personal income:
   
The management of Roller King has determined the following subjective probabilities concerning the percentage growth in personal income:
   
a. What is the expected value of the cash inflow from the project?
b. Determine the variance of the inflows.
c. Determine the standard deviation of the inflows

Accepted Answer

@#IMG-DLM& a.The expected value of the c

Question 12

Complete the following table.

Accepted Answer

A)  1.2, 1.2143, 1.1176, 1.2474, 1.2 
B)  1.2, 1.1176, 1.2474, 1.2143, 1.2 
C)  .8333, .8947, .8235, .8017, .8333 
D)  .8333, .8235, .8947, .8017, .8333 
E)  None of the above 
A)  1.2, 1.2143, 1.1176, 1.2474, 1.2 
B)  1.2, 1.1176, 1.2474, 1.2143, 1.2 
C)  .8333, .8947, .8235, .8017, .8333 
D)  .8333, .8235, .8947, .8017, .8333 
E)  None of the above

Question 13

The value of an investment that is found by taking the square root of the variance is called the:

Accepted Answer

A)  expected value. 
B)  standard deviation. 
C)  standard value. 
D)  normal distribution. 
E)  probability distribution. 
A)  expected value. 
B)  standard deviation. 
C)  standard value. 
D)  normal distribution. 
E)  probability distribution.

Question 14

Use the following information to answer questions 13 - 15
The following data is on two one period capital projects.  
-What is the variance of each project's cash flow?

Accepted Answer

A)  A = 25,500, B = 9,700 
B)  A = 50,100. B = 19,400 
C)  A = 75,200, B = 29,100 
D)  A = 100,200, B = 38,800 
E)  A = 125,400, B = 48,500 
A)  A = 25,500, B = 9,700 
B)  A = 50,100. B = 19,400 
C)  A = 75,200, B = 29,100 
D)  A = 100,200, B = 38,800 
E)  A = 125,400, B = 48,500

Question 15

A risk-return indifference curve shows combinations of increasingly risky investments with decreasing rates of return that are equally attractive to an investor.

Accepted Answer

A) True 
 B)False

Question 16

A composite event consists of a number of elementary events.

Accepted Answer

A) True 
 B)False

Question 17

The value of an investment that is found by subtracting the expected value of the project from each possible outcome, squaring each of these values, multiplying each squared deviation by the probability of each respective outcome, and then summing the resulting products is called the:

Accepted Answer

A)  expected value. 
B)  standard deviation. 
C)  variance. 
D)  normal distribution. 
E)  probability distribution. 
A)  expected value. 
B)  standard deviation. 
C)  variance. 
D)  normal distribution. 
E)  probability distribution.

Question 18

A number of elementary events is called:

Accepted Answer

A)  an event set. 
B)  a composite event. 
C)  an elementary event. 
D)  a probable event. 
E)  a subjective probability event. 
A)  an event set. 
B)  a composite event. 
C)  an elementary event. 
D)  a probable event. 
E)  a subjective probability event.

Question 19

A continuous probability distribution would be represented by a bar graph and would not contain information on the probability values in between those value illustrated in the graph.

Accepted Answer

A) True 
 B)False

Question 20

If we assume that the decision maker is risk-averse, then we can conclude that the economic nature of risk is that its presence will have the following effect on the desirability of a given undertaking or investment project.

Accepted Answer

A)  Increase the desirability of a given undertaking or investment project. 
B)  Has no effect on the desirability of a given undertaking or investment project. 
C)  Lessen the desirability of a given undertaking or investment project. 
D)  Its presence is not related to the desirability of a given undertaking or investment project. 
E)  Increase the market efficiency of a given undertaking or investment project. 
A)  Increase the desirability of a given undertaking or investment project. 
B)  Has no effect on the desirability of a given undertaking or investment project. 
C)  Lessen the desirability of a given undertaking or investment project. 
D)  Its presence is not related to the desirability of a given undertaking or investment project. 
E)  Increase the market efficiency of a given undertaking or investment project.

An efficient portfolio is a project or a combination of investments that will involve the least risk for a given rate of return.

For a normal distribution, the amount of the distribution that lies within plus or minus two standard deviations of the mean is approximately:

An event set consists of all elementary events that satisfy a particular outcome.

In probability analysis, the term "event" is used to designate an outcome.

A risk-neutral investor is indifferent between two investments with the same expected return, regardless of their risk.

Each event in a listing of all possible outcomes of a given situation is called a composite event.

For a normal distribution, the amount of the distribution that lies within plus or minus one standard deviation of the mean is approximately:

In project analysis, the assumption usually made is that the decision maker is risk averse.

Complete the following table.

The value of an investment that is found by taking the square root of the variance is called the:

Use the following information to answer questions 13 - 15 The following data is on two one period capital projects. -What is the variance of each project's cash flow?

A risk-return indifference curve shows combinations of increasingly risky investments with decreasing rates of return that are equally attractive to an investor.

A composite event consists of a number of elementary events.

The value of an investment that is found by subtracting the expected value of the project from each possible outcome, squaring each of these values, multiplying each squared deviation by the probability of each respective outcome, and then summing the resulting products is called the:

A number of elementary events is called:

A continuous probability distribution would be represented by a bar graph and would not contain information on the probability values in between those value illustrated in the graph.

If we assume that the decision maker is risk-averse, then we can conclude that the economic nature of risk is that its presence will have the following effect on the desirability of a given undertaking or investment project.

Introduction, Basic Principles, and Methodology

Revenue of the Firm

Topics in Demand Analysis and Estimation

Economic Forecasting

Production Analysis

Cost of Production

Profit Analysis of the Firm

Perfect Competition and Monopoly

Monopolistic Competition and Oligopoly

Games, Information and Strategy

Topics in Pricing and Profit Analysis

Factor Markets

Fundamentals of Project Evaluation

Economics of Public Sector Decisions

Legal and Regulatory Environment of the Firm

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Exam 14: Risk in Project Analysis

An efficient portfolio is a project or a combination of investments that will involve the least risk for a given rate of return.

For a normal distribution, the amount of the distribution that lies within plus or minus two standard deviations of the mean is approximately:

An event set consists of all elementary events that satisfy a particular outcome.

In probability analysis, the term "event" is used to designate an outcome.

A risk-neutral investor is indifferent between two investments with the same expected return, regardless of their risk.

Each event in a listing of all possible outcomes of a given situation is called a composite event.

For a normal distribution, the amount of the distribution that lies within plus or minus one standard deviation of the mean is approximately:

In project analysis, the assumption usually made is that the decision maker is risk averse.

Complete the following table.

The value of an investment that is found by taking the square root of the variance is called the:

Use the following information to answer questions 13 - 15 The following data is on two one period capital projects. -What is the variance of each project's cash flow?

A risk-return indifference curve shows combinations of increasingly risky investments with decreasing rates of return that are equally attractive to an investor.

A composite event consists of a number of elementary events.

The value of an investment that is found by subtracting the expected value of the project from each possible outcome, squaring each of these values, multiplying each squared deviation by the probability of each respective outcome, and then summing the resulting products is called the:

A number of elementary events is called:

A continuous probability distribution would be represented by a bar graph and would not contain information on the probability values in between those value illustrated in the graph.

If we assume that the decision maker is risk-averse, then we can conclude that the economic nature of risk is that its presence will have the following effect on the desirability of a given undertaking or investment project.

Introduction, Basic Principles, and Methodology

Revenue of the Firm

Topics in Demand Analysis and Estimation

Economic Forecasting

Production Analysis

Cost of Production

Profit Analysis of the Firm

Perfect Competition and Monopoly

Monopolistic Competition and Oligopoly

Games, Information and Strategy

Topics in Pricing and Profit Analysis

Factor Markets

Fundamentals of Project Evaluation

Economics of Public Sector Decisions

Legal and Regulatory Environment of the Firm

Filters