Part I: True or false (no explanation required)
1. If the current yield on a bond is higher than the coupon rate then its price is less than its par value.
2. A US equity mutual fund that last year had a = 0 underperformed over that period.
3. A US bond mutual fund that last year had a Sharpe ratio = 0 underperformed over that period.
4. If we sell a fully depreciated asset for $10,000 and our tax rate is 30%, the resulting after-tax cash flow is $7,000.
5. The average EBITDA multiple for real estate is higher than for computer software.
6. A firm will increase its market value only if its EVA > WACC.
7. On November 7, 2013, the Twitter IPO ended the day at $44.90. In determining the proper price for a Twitter share a reasonable approach would be to use a net income multiple.
8. Portfolio C is composed of equal investment in (normally distributed) assets A and B. The b of C is the average of the betas of assets A and B.
9. Portfolio C is composed of equal investment in (normally distributed) assets A and B. The Sharpe ratio of C is the average of the Sharpe ratios of assets A and B.
10. As the maturity date for a zero coupon bond approaches, its price normally rises.