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Foundations of Financial Management Study Set 5
Quiz 13: Risk and Capital Budgeting
A Basic Assumption in Financial Theory Is That Most Investors
Question 58
True False
A basic assumption in financial theory is that most investors and managers are risk seekers.
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Q 59
In order to reduce risk, one should diversify into areas that are positively correlated with current areas of involvement.
Q 60
Generally, because of the unpredictability of earnings, cyclical stocks are given higher price-earnings multiples than growth stocks.
Q 61
A firm might be willing to accept high risk in a given investment if the portfolio effect (for the whole firm) were beneficial.
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