431. Which investment will be characterized by the highest monetary return at the end of the investment horizon? Assume annual compounding.
A. ? 5 years at the interest rate of 5% per year.
B. ? 7 years at the interest rate of 3% per year.
C. ? 4 years at the interest rate of 9% per year.
D. ? 2 years at the interest rate of 6% per year.
432. Which of the following represents the future value of £1,000 invested at 10% per annum for 10 years?
A. ? £2,500
B. ? £1,913
C. ? £2,594
D. ? £2,600
433. Using the NPV criteria, a project should be selected when:
A. ? Its NPV is positive or zero.
B. ? Its NPV is equal to zero.
C. ? Its NPV is negative.
D. ? Its outflows are greater than its inflows.
434. Why is it sometimes possible to obtain inconsistent results between Internal Rate of Return (IRR) and Net Present Value (NPV) for the purposes of comparison between two or more projects?
A. ? Because they are measured in different units.
B. ? Because IRR does not take account of the time value of money.
C. ? Because NPV does not take account of the time value of money.
D. ? Because the NPVs ‘cross over’ as the discount rate is increased.
435. Which of the following is not true with respect to the Accounting Rate of Return (ARR)?
A. ? It is based on accounting concepts such as accounting profit and depreciation.
B. ? It takes account of the time value of money.
C. ? The hurdle rate is arbitrary.
D. ? The definition of both profit and capital can be somewhat arbitrary and variable.
436. The fundamental principle of the application of Discounted Cash Flow (DCF) techniques to investment appraisal is:
A. ? To incorporate all incremental cash flow.
B. ? To incorporate all sunk cost.
C. ? To incorporate all relevant depreciation.
D. ? To absorb all company overheads.
437. Which of the following is not a criticism of payback?
A. ? It ignores potentially valuable cash flow after the cut-off point.
B. ? The cut-off point for recovery of investment outlay is arbitrary.
C. ? The technique cannot be adapted to discounted cash flow
D. ? It may help to resolve large amounts of uncertainty.
438. Which of the following is not a characteristic of wholesale markets?
A. Firms deal with other firms.
B. Lending and borrowing is coordinated through banks.
C. Borrowing and lending is not intermediated.
D. Very large quantities of money are at stake.
439. Which of the following world stock exchanges were in the top five by value of transaction in 2009?
A. London Stock Exchange.
B. Shanghai Stock Exchange.
C. Deutsche Börse.
D. Hong Kong Exchanges.
440. Which of the following is not a characteristic of a preference share?
A. Ranks last for payment in the event of company liquidation.
B. Unpaid dividend accrues until it can be paid.
C. Do not usually have voting rights unless dividends fall into arrears.
D. It is more like debt than a share in its characteristics.
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