CH7: Risk and Return Quiz
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Questions and Answers

Which type of investment would Apple computers be considered today?

  • low risk investment with high annual expected returns (correct)
  • low risk investment with low annual expected returns
  • high risk investment with low annual expected returns
  • high risk investment with high annual expected returns

    • What are the two axes of a risk matrix?

  • Whether the customer demand and market around a proposed idea are real; whether the product can actually be built as expected (correct)
  • The profitability of the idea and the timeliness of the new technology innovation
  • Management quality and customer demand
  • The degree of familiarity with the new market and degree of familiarity with the new product or technology

    • What type of economy does Dropbox exhibit?

  • Economies of scope with increasing risk
  • Economies of scope with opportunity cost
  • Economies of scale with static infrastructure
  • Economies of scale with increasing returns (correct)

    • What is a characteristic of a flow-through entity?

    <p>Taxation of corporate profits</p> Signup and view all the answers

    What type of business structure is characterized by perpetual continuity?

    <p>Regular C-Corporation</p> Signup and view all the answers

    What happens to creditors if a corporation fails and proper formalities have been followed?

    <p>They have a limited claim on the company's assets</p> Signup and view all the answers

    What is the definition of an outcome resulting from an action being certain?

    <p>When it will definitely happen</p> Signup and view all the answers

    Which type of uncertainty is not listed in the text?

    <p>Market</p> Signup and view all the answers

    What is a characteristic of a good entrepreneur in terms of risk-taking?

    <p>They take calculated risks</p> Signup and view all the answers

    Which of the following tasks is the most uncertain?

    <p>Begin independent research on self-driving cars</p> Signup and view all the answers

    What is a potential reason why a VR company struggled to stay afloat?

    <p>The hype around VR died and investors no longer saw the vertical as promising</p> Signup and view all the answers

    What is the definition of regret in the context of entrepreneurship?

    <p>The amount of gain that a person expects</p> Signup and view all the answers

    What is a unique strategy employed by Tencent that is not commonly seen among major Western tech companies?

    <p>Refusal to cooperate with the Chinese government</p> Signup and view all the answers

    What leads to an increased downside in a venture?

    <p>Increased hazard</p> Signup and view all the answers

    What type of case is an entrepreneur's assumption that their revenue growth will continue at the same rate?

    <p>Optimistic case</p> Signup and view all the answers

    What does 'pro forma' mean in the context of financial planning?

    <p>In advance of actual data</p> Signup and view all the answers

    What is true about the relationship between book value and market value?

    <p>Market value factors in the company's growth prospects</p> Signup and view all the answers

    What is typically not a category of an operating expense?

    <p>Investment returns</p> Signup and view all the answers

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