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Investment T

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Investment T
Chapter 10

Discussion Questions

|10-1. |How is valuation of any financial asset related to future cash flows? |
| | |
| |The valuation of a financial asset is equal to the present value of future cash flows. |
| | |
|10-2. |Why might investors demand a lower rate of return for an investment in Exxon Mobil as compared to United |
| |Airlines? |
| | |
| |Because Exxon Mobil has less risk than United Airlines, Exxon Mobil has relatively high returns and a strong |
| |market position; United Airlines has had financial difficulties and emerged from bankruptcy in 2006. |
| | |
|10-3. |What are the three factors that influence the required rate of return by investors? |
| | |
| |The three factors that influence the demanded rate of return are: |
| | |
| |The real rate of return
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