[单选题]Which one of the following statements correctly applies to the period 1926–2016?
A. Large-company stocks earned a higher average risk premium than did small-company stocks.
B. The average inflation rate exceeded the average return on U.S. Treasury bills.
C. Large-company stocks had an average annual return of 14.7 percent.
D. Inflation averaged 2.6 percent for the period.
E. Long-term corporate bonds outperformed long-term government bonds.
Difficulty: 1 Easy
Topic: Historical performance
Learning Objective: 12-02 Discuss the historical returns on various important types of investments.

[单选题]Which one of the following statements correctly defines a time value of money relationship?
A. Time and future values are inversely related, all else held constant.
B. Interest rates and time are positively related, all else held constant.
C. An increase in a positive discount rate increases the present value.
D. An increase in time increases the future value given a zero rate of interest.
E. Time and present value are inversely related, all else held constant.
Difficulty: 1 Easy
Topic: Time value of money
Learning Objective: 06-01 Determine the future and present value of investments with multiple cash flows.

[多选题]Which statements are correct according to the Chicago Convention on International Civil Aviation?
A. The Convention does not apply to state aircraft.
B. Those aircraft which operate on schedule international air services are to be distinguished from other civilian aircraft.
C. International air service may not be operated over or into the territory of a state without the state’s special authorization.
D. Aircraft not engaged in scheduled international air services have the right to make flights into or in transit non-stop across the contracting state’s territory without prior permission.

[单选题]Which one of the following statements concerning scenario analysis is correct?
A. The pessimistic case scenario determines the maximum loss, in current dollars, that a firm could possibly incur from a given project.
B. Scenario analysis defines the entire range of results that could be realized from a proposed investment project.
C. Scenario analysis determines which variable has the greatest impact on a project's final outcome.
D. Scenario analysis helps managers analyze various outcomes that are possible given reasonable ranges for each of the assumptions.
E. Management is guaranteed a positive outcome for a project when the worst-case scenario produces a positive NPV.
Difficulty: 2 Medium
Topic: Scenario analysis
Learning Objective: 11-02 Perform and interpret a scenario analysis for a proposed investment.

[单选题]Which one of the following statements related to unexpected returns is correct?
A. All announcements by a firm affect that firm's unexpected returns.
B. Unexpected returns over time have a negative effect on the total return of a firm.
C. Unexpected returns are relatively predictable in the short-term.
D. Unexpected returns generally cause the actual return to vary significantly from the expected return over the long-term.
E. Unexpected returns can be either positive or negative in the short term but tend to be zero over the long-term.
Difficulty: 1 Easy
Topic: Expected return
Learning Objective: 13-01 Show how to calculate expected returns, variance, and standard deviation.

[单选题]Which one of the following is correct in relation to pro forma statements?
A. Fixed assets must increase if sales are projected to increase.
B. Net working capital is affected only when a firm's sales are expected to exceed the firm's current production capacity.
C. The addition to retained earnings is equal to net income less cash dividends.
D. Long-term debt varies directly with sales when a firm is currently operating at maximum capacity.
E. Inventory changes are not proportional to sales changes.
Difficulty: 1 Easy
Topic: Financial planning models
Learning Objective: 04-01 Apply the percentage of sales method.

[单选题]Which one of the following statements is correct?
A. The unexpected return is always negative.
B. The expected return minus the unexpected return is equal to the total return.
C. Over time, the average return is equal to the unexpected return.
D. The expected return includes the surprise portion of news announcements.
E. Over time, the average unexpected return will be zero.
Difficulty: 1 Easy
Topic: Expected return
Learning Objective: 13-01 Show how to calculate expected returns, variance, and standard deviation.

[单选题]Which one of the following statements is a correct reflection of the U.S. financial markets for the period 1926–2016?
A. U.S. Treasury bill returns never exceeded a return of 9 percent in any one year.
B. U.S. Treasury bills had an annual return in excess of 10 percent in three or more years.
C. Inflation equaled or exceeded the return on U.S. Treasury bills every year during the period.
D. Long-term government bonds outperformed U.S. Treasury bills every year during the period.
E. National deflation occurred in at least one year during every decade during the period.
Difficulty: 1 Easy
Topic: Historical performance
Learning Objective: 12-02 Discuss the historical returns on various important types of investments.

[单选题]Which one of these statements related to discounted payback is correct?
A. Payback is a better method of analysis than discounted payback.
B. Discounted payback is used more frequently in business than payback.
C. Discounted payback does not require a cutoff point.
D. Discounted payback is biased towards short-term projects.
E. The discounted payback period increases as the discount rate decreases.
Difficulty: 1 Easy
Topic: Discounted payback
Learning Objective: 09-03 Discuss the discounted payback rule and some of its shortcomings.