Investors prefer $1 today versus $1 in the future due to
A) time value of money.
B) response to incentives.
C) the need for immediate gratification.
D) A and B.
The price of Netflix stock dropped sharply after customers responded negatively to a change in pricing policies. The change in stock price illustrates which principle?
A) Market prices reflect information.
B) Individuals respond to incentives.
C) Cash flows are the source of value.
D) The time-value of money.
For the risk-return principle implies that the more risky a given course of action, the higher the expected return must be.
Answer: TRUE
The financial manager should examine available risk-return trade-offs and make his decision based upon the greatest expected return.
Answer: FALSE
Only a few financial decisions involve some sort of risk-return tradeoff.
Answer: FALSE
In efficient markets, price adjustments to new information are gradual.
Answer: FALSE
Rewarding executives for increasing quarterly earnings will motivate them to act in the long-term best interests of shareholders.
Answer: FALSE
In an efficient market, prices will quickly adjust to new information.
Answer: TRUE
