AAFM MCQ 3

Question 1

Net present value (NPV) analysis accepts a project when the NPV is:

Accepted Answer

Greater than zero

Answer

A positive NPV indicates the project adds value beyond its cost of capital, so it should be accepted.

Question 2

Which asset class is generally considered to carry the highest long-term risk and return?

Accepted Answer

Equities (stocks)

Answer

Equities historically offer higher returns but with greater volatility than fixed-income or cash.

Question 3

What is the primary purpose of a company's statement of cash flows?

Accepted Answer

Show changes in cash from operating, investing, and financing activities

Answer

The cash flow statement tracks cash movements across operating, investing, and financing activities.

Question 4

In anti-money laundering (AML) practice, 'KYC' stands for:

Accepted Answer

Know Your Customer

Answer

KYC (Know Your Customer) requires verifying client identity to prevent illicit financial activity.

Question 5

The Capital Asset Pricing Model (CAPM) uses beta to measure:

Accepted Answer

Systematic risk relative to the market

Answer

Beta in CAPM measures an asset's sensitivity to overall market movements (systematic risk).

American Academy of Financial Management (AAFM) Practice Test