Copy and Edit

TOPIC 2

Description

FRM FRM Quiz on TOPIC 2, created by f.yafai on 26/10/2013.
f.yafai
Quiz by f.yafai, updated more than 1 year ago
f.yafai
Created by f.yafai over 10 years ago
21
0
0

Resource summary

Question 1

Question
Which of the following would be the BEST motivator for outsourcing information technology (IT) systems?
Answer
  • Internal IT resources are stretched
  • IT is regarded as a core strategic need
  • There is high risk of compromising confidentiality of information held on the IT system.
  • There is high risk of the cost of systems maintenance compromising other business objectives.

Question 2

Question
Reducing risk without any impact on business cash flows is most likely to
Answer
  • Decrease investors' required rate of return
  • Decrease the Enterprise Value
  • Decrease the PV of expected future business cash flows
  • Increase the cost of capital

Question 3

Question
Under CAPM, diversifiable risk: ( two answers )
Answer
  • Is also referred to as systematic risk. (systematic risk: affect all sectors)
  • Is a sector-specific but NOT firm-specific
  • Is unavoidable for most businesses
  • Affects share prices

Question 4

Question
Which of the following statements is true?
Answer
  • Risk seeking investors expect a positive correlation between risk and expected return.
  • Risk is an inevitable result of being in business
  • Minimising all risk should be a key objective for all firms

Question 5

Question
For a retail company, the possible loss of sales due to heavy snow forecast next week is best described as:
Answer
  • Risk
  • Volatility
  • Uncertainty
  • Pre-transactio exposure

Question 6

Question
Lower borrowing interest costs will usually be achieved by:
Answer
  • Increasing gearing
  • Accepting restrictive loan covenants
  • Bootstrapping
  • Actively pursuing riskier business rather than higher return
  • Making a special dividend payment

Question 7

Question
The 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?
Answer
  • Minus 1%
  • 1%
  • 3%
  • 3.5%
  • 8%
Show full summary Hide full summary

Want to create your own Quizzes for free with GoConqr? Learn more.

Similar

Edexcel Additional Science Biology Topic 2- Life Processes
hchen8nrd
Chemistry C2
greenchloe1998
Edexcel Biology Topic 1 and 2 AS
Emily Carson
Edexcel Additional Science Biology Topic 2- Life Processes
lewis001
4.2. Organisation
Brodie McMeowface
psycholgoy as level topic 2 - memory
Talya Hambling
religious studies- the end of life vocab
libbyguillamon
Edexcel Additional Science Biology Topic 2- Life Processes
AnnsaurusRex
National 5 Chemistry-Atomic Theory
NinaJasT
AS ICT - Topic 2: The Importance of Up-To-Date, Accurate & Complete Information
dominszreder
Características cualitativas de los estados financieros
Michelle Cruz4299
Browse Library