Question 1

The efficient frontier portfolios are

Accepted Answer

A)  portfolios that risk adverse investors will select. 
B)  portfolios where all the market risk is diversified away. 
C)  portfolios where the correlation among assets is 0.0. 
D)  portfolios that dominate all others. 
A)  portfolios that risk adverse investors will select. 
B)  portfolios where all the market risk is diversified away. 
C)  portfolios where the correlation among assets is 0.0. 
D)  portfolios that dominate all others.

Question 2

Which of the following statements regarding risk of assets is correct?

Accepted Answer

A)  Every decade since 1950 has seen a lot of stock market volatility. 
B)  The bond market has experienced the most volatility in the 1980s as interest rates varied dramatically. 
C)  High risk means that an investor may receive poor returns in the short run. 
D)  All of the statements are correct. 
A)  Every decade since 1950 has seen a lot of stock market volatility. 
B)  The bond market has experienced the most volatility in the 1980s as interest rates varied dramatically. 
C)  High risk means that an investor may receive poor returns in the short run. 
D)  All of the statements are correct.

Question 3

Year-to-date, Oracle had earned a 15.0 percent return. During the same time period, Valero Energy earned −12.96 percent and McDonald's earned 1.80 percent. If you have a portfolio made up of 50 percent Oracle, 10 percent Valero Energy, and 40 percent McDonald's, what is your portfolio return?

Accepted Answer

A)  6.14 percent 
B)  4.86 percent 
C)  5.86 percent 
D)  6.92 percent 
A)  6.14 percent 
B)  4.86 percent 
C)  5.86 percent 
D)  6.92 percent

Question 4

Which of these is a measure summarizing the overall past performance of an investment?

Accepted Answer

A)  average return 
B)  dollar return 
C)  market return 
D)  percentage return 
A)  average return 
B)  dollar return 
C)  market return 
D)  percentage return

Question 5

Compute the standard deviation of Kohl's monthly returns. The past five monthly returns for Kohl's are 5.55 percent, 8.62 percent, −4.44 percent, −1.52 percent, and 9.75 percent.

Accepted Answer

A)  4.92 percent 
B)  5.07 percent 
C)  6.28 percent 
D)  6.12 percent 
A)  4.92 percent 
B)  5.07 percent 
C)  6.28 percent 
D)  6.12 percent

Question 6

Year-to-date, Company O had earned a −2.10 percent return. During the same time period, Company V earned 8.00 percent and Company M earned 6.25 percent. If you have a portfolio made up of 40 percent Company O, 30 percent Company V, and 30 percent Company M, what is your portfolio return?

Accepted Answer

A)  3.435 percent 
B)  5.115 percent 
C)  12.15 percent 
D)  16.35 percent 
A)  3.435 percent 
B)  5.115 percent 
C)  12.15 percent 
D)  16.35 percent

Question 7

A stock has an expected return of 12 percent and a standard deviation of 25 percent. Long-term Treasury bonds have an expected return of 5 percent and a standard deviation of 9 percent. Given this data, which of the following statements is correct?

Accepted Answer

A)  The two assets have the same coefficient of variation. 
B)  The stock investment has a better risk-return trade-off. 
C)  The bond investment has a better risk-return trade-off. 
D)  The stock investment and the bond investment have the same diversifiable risk. 
A)  The two assets have the same coefficient of variation. 
B)  The stock investment has a better risk-return trade-off. 
C)  The bond investment has a better risk-return trade-off. 
D)  The stock investment and the bond investment have the same diversifiable risk.

Question 8

Noble stock was $60.00 per share at the end of last year. Since then, it paid a $2.00 per share dividend last year. The stock price is currently $58. If you owned 400 shares of Noble, what was your percent return?

Accepted Answer

A)  −3.33 percent 
B)  0 percent 
C)  3.33 percent 
D)  3.45 percent 
A)  −3.33 percent 
B)  0 percent 
C)  3.33 percent 
D)  3.45 percent

Question 9

The standard deviation of the past five monthly returns for K and Company are 2.28 percent, 2.64 percent, −1.05 percent, 4.25 percent, and 9.25 percent. What is the standard deviation?

Accepted Answer

A)  1.45 percent 
B)  1.62 percent 
C)  3.47 percent 
D)  3.76 percent 
A)  1.45 percent 
B)  1.62 percent 
C)  3.47 percent 
D)  3.76 percent

Question 10

The standard deviation of the past five monthly returns for PG Company are 2.75 percent, −0.75 percent, 4.15 percent, 6.29 percent, and 3.84 percent. What is the standard deviation?

Accepted Answer

A)  2.309 percent 
B)  2.581 percent 
C)  3.256 percent 
D)  3.406 percent 
A)  2.309 percent 
B)  2.581 percent 
C)  3.256 percent 
D)  3.406 percent

Question 11

If you own 300 shares of Alaska Air at $15.88, 250 shares of Best Buy at $151.00, and 1,150 shares of Ford Motor at $3.51, what are the portfolio weights of each stock?

Accepted Answer

A)  weight of Alaska Air: 10.23 percent, weight of Best Buy: 81.09 percent, weight of Ford Motor: 8.67 percent 
B)  weight of Alaska Air: 6.23 percent, weight of Best Buy: 71.09 percent, weight of Ford Motor: 22.67 percent 
C)  weight of Alaska Air: 15.23 percent, weight of Best Buy: 81.09 percent, weight of Ford Motor: 3.67 percent 
D)  weight of Alaska Air: 20.23 percent, weight of Best Buy: 76.09 percent, weight of Ford Motor: 3.67 percent 
A)  weight of Alaska Air: 10.23 percent, weight of Best Buy: 81.09 percent, weight of Ford Motor: 8.67 percent 
B)  weight of Alaska Air: 6.23 percent, weight of Best Buy: 71.09 percent, weight of Ford Motor: 22.67 percent 
C)  weight of Alaska Air: 15.23 percent, weight of Best Buy: 81.09 percent, weight of Ford Motor: 3.67 percent 
D)  weight of Alaska Air: 20.23 percent, weight of Best Buy: 76.09 percent, weight of Ford Motor: 3.67 percent

Question 12

A stock has an expected return of 12 percent and a standard deviation of 20 percent. Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 15 percent. Given this data, which of the following statements is correct?

Accepted Answer

A)  The two assets have the same coefficient of variation. 
B)  The stock investment has a better risk-return trade-off. 
C)  The bond investment has a better risk-return trade-off. 
D)  The stock investment and the bond investment have the same diversifiable risk. 
A)  The two assets have the same coefficient of variation. 
B)  The stock investment has a better risk-return trade-off. 
C)  The bond investment has a better risk-return trade-off. 
D)  The stock investment and the bond investment have the same diversifiable risk.

Question 13

Which of the following statements is correct?

Accepted Answer

A)  The dollar return is a more useful measure to compare performance because it more accurately reflects the change in wealth of the investor. 
B)  A dominant portfolio is one that has the highest risk and highest return within a set of portfolios. 
C)  By adding stocks to your portfolio, it is possible to effectively eliminate nearly all of the market risk. 
D)  None of these choices are correct. 
A)  The dollar return is a more useful measure to compare performance because it more accurately reflects the change in wealth of the investor. 
B)  A dominant portfolio is one that has the highest risk and highest return within a set of portfolios. 
C)  By adding stocks to your portfolio, it is possible to effectively eliminate nearly all of the market risk. 
D)  None of these choices are correct.

Question 14

The past five monthly returns for K and Company are 2.28 percent, 2.64 percent, −1.05 percent, 4.25 percent, and 9.25 percent. What is the average monthly return?

Accepted Answer

A)  1.45 percent 
B)  1.62 percent 
C)  3.47 percent 
D)  3.89 percent 
A)  1.45 percent 
B)  1.62 percent 
C)  3.47 percent 
D)  3.89 percent

Question 15

Consider the risk-return relationship in T-bills during each decade since 1950. Given this data, which of the following statements is correct?
$$\begin{array} { c c } 
\text { Decade } & \text { CoV } \
1950 \mathrm {~s} & 0.40 \
1960 \mathrm {~s} & 0.33 \
1970 \mathrm {~s} & 0.29 \
1980 \mathrm {~s} & 0.29 \
1990 \mathrm {~s} & 0.24 \
2000 \mathrm {~s} & 0.55
\end{array}$$

Accepted Answer

A)  The best risk-return relationship was during the 1950s. 
B)  The best risk-return relationship was during the 1990s. 
C)  Since T-bills are backed by the full faith of the U.S. government, computing the risk-return relationship for them is invalid. 
D)  None of these choices are correct. 
A)  The best risk-return relationship was during the 1950s. 
B)  The best risk-return relationship was during the 1990s. 
C)  Since T-bills are backed by the full faith of the U.S. government, computing the risk-return relationship for them is invalid. 
D)  None of these choices are correct.

Question 16

Sally wants to invest in only two stocks. Which pair of stocks should Sally select?

Accepted Answer

A)  Stocks A and B move downward at the same time. 
B)  Stocks C and D move in opposite directions at the same time. 
C)  Stocks E and F move upward at the same time. 
D)  Stocks G and H move randomly at the same time. 
A)  Stocks A and B move downward at the same time. 
B)  Stocks C and D move in opposite directions at the same time. 
C)  Stocks E and F move upward at the same time. 
D)  Stocks G and H move randomly at the same time.

Question 17

An investor owns $10,000 of Adobe Systems stock, $15,000 of Dow Chemical, and $25,000 of Office Depot. What are the portfolio weights of each stock?

Accepted Answer

A)  Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333 
B)  Adobe System = 0.2, Dow Chemical = 0.3, Office Depot = 0.5 
C)  Adobe System = 0.3, Dow Chemical = 0.2, Office Depot = 0.5 
D)  Adobe System = 0.2667, Dow Chemical = 0.3333, Office Depot = 0.4 
A)  Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333 
B)  Adobe System = 0.2, Dow Chemical = 0.3, Office Depot = 0.5 
C)  Adobe System = 0.3, Dow Chemical = 0.2, Office Depot = 0.5 
D)  Adobe System = 0.2667, Dow Chemical = 0.3333, Office Depot = 0.4

Question 18

An investor owns $8,000 of Adobe Systems stock, $5,000 of Dow Chemical, and $3,000 of Office Depot. What are the portfolio weights of each stock?

Accepted Answer

A)  Adobe: 0.5, Dow Chemical: 0.31, Office Depot: 0.19 
B)  Adobe: 0.5, Dow Chemical: 0.32, Office Depot: 0.18 
C)  Adobe: 0.5, Dow Chemical: 0.13, Office Depot: 0.27 
D)  Adobe: 0.5, Dow Chemical: 0.19, Office Depot: 0.31 
A)  Adobe: 0.5, Dow Chemical: 0.31, Office Depot: 0.19 
B)  Adobe: 0.5, Dow Chemical: 0.32, Office Depot: 0.18 
C)  Adobe: 0.5, Dow Chemical: 0.13, Office Depot: 0.27 
D)  Adobe: 0.5, Dow Chemical: 0.19, Office Depot: 0.31

Question 19

You have $10,000 to invest. You want to purchase shares of Alaska Air at $50.00, Best Buy at $50.00, and Ford Motor at $10.00. How many shares of each company should you purchase so that your portfolio consists of 25 percent Alaska Air, 40 percent Best Buy, and 35 percent Ford Motor? Report only whole stock shares.

Accepted Answer

A)  50 shares of Alaska Air, 80 shares of Best Buy, and 300 shares of Ford Motor 
B)  50 shares of Alaska Air, 80 shares of Best Buy, and 350 shares of Ford Motor 
C)  40 shares of Alaska Air, 90 shares of Best Buy, and 300 shares of Ford Motor 
D)  75 shares of Alaska Air, 40 shares of Best Buy, and 350 shares of Ford Motor 
A)  50 shares of Alaska Air, 80 shares of Best Buy, and 300 shares of Ford Motor 
B)  50 shares of Alaska Air, 80 shares of Best Buy, and 350 shares of Ford Motor 
C)  40 shares of Alaska Air, 90 shares of Best Buy, and 300 shares of Ford Motor 
D)  75 shares of Alaska Air, 40 shares of Best Buy, and 350 shares of Ford Motor

Question 20

Which of these is the dollar return characterized as a percentage of money invested?

Accepted Answer

A)  average return 
B)  dollar return 
C)  market return 
D)  percentage return 
A)  average return 
B)  dollar return 
C)  market return 
D)  percentage return

The efficient frontier portfolios are

Which of the following statements regarding risk of assets is correct?

Year-to-date, Oracle had earned a 15.0 percent return. During the same time period, Valero Energy earned −12.96 percent and McDonald's earned 1.80 percent. If you have a portfolio made up of 50 percent Oracle, 10 percent Valero Energy, and 40 percent McDonald's, what is your portfolio return?

Which of these is a measure summarizing the overall past performance of an investment?

Compute the standard deviation of Kohl's monthly returns. The past five monthly returns for Kohl's are 5.55 percent, 8.62 percent, −4.44 percent, −1.52 percent, and 9.75 percent.

Year-to-date, Company O had earned a −2.10 percent return. During the same time period, Company V earned 8.00 percent and Company M earned 6.25 percent. If you have a portfolio made up of 40 percent Company O, 30 percent Company V, and 30 percent Company M, what is your portfolio return?

A stock has an expected return of 12 percent and a standard deviation of 25 percent. Long-term Treasury bonds have an expected return of 5 percent and a standard deviation of 9 percent. Given this data, which of the following statements is correct?

Noble stock was $60.00 per share at the end of last year. Since then, it paid a $2.00 per share dividend last year. The stock price is currently $58. If you owned 400 shares of Noble, what was your percent return?

The standard deviation of the past five monthly returns for K and Company are 2.28 percent, 2.64 percent, −1.05 percent, 4.25 percent, and 9.25 percent. What is the standard deviation?

The standard deviation of the past five monthly returns for PG Company are 2.75 percent, −0.75 percent, 4.15 percent, 6.29 percent, and 3.84 percent. What is the standard deviation?

If you own 300 shares of Alaska Air at $15.88, 250 shares of Best Buy at $151.00, and 1,150 shares of Ford Motor at $3.51, what are the portfolio weights of each stock?

A stock has an expected return of 12 percent and a standard deviation of 20 percent. Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 15 percent. Given this data, which of the following statements is correct?

Which of the following statements is correct?

The past five monthly returns for K and Company are 2.28 percent, 2.64 percent, −1.05 percent, 4.25 percent, and 9.25 percent. What is the average monthly return?

Consider the risk-return relationship in T-bills during each decade since 1950. Given this data, which of the following statements is correct? Decade CoV 1950 0.40 1960 0.33 1970 0.29 1980 0.29 1990 0.24 2000 0.55

Sally wants to invest in only two stocks. Which pair of stocks should Sally select?

An investor owns $10,000 of Adobe Systems stock, $15,000 of Dow Chemical, and $25,000 of Office Depot. What are the portfolio weights of each stock?

An investor owns $8,000 of Adobe Systems stock, $5,000 of Dow Chemical, and $3,000 of Office Depot. What are the portfolio weights of each stock?

Which of these is the dollar return characterized as a percentage of money invested?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 9: Characterizing Risk and Return

The efficient frontier portfolios are

Which of the following statements regarding risk of assets is correct?

Year-to-date, Oracle had earned a 15.0 percent return. During the same time period, Valero Energy earned −12.96 percent and McDonald's earned 1.80 percent. If you have a portfolio made up of 50 percent Oracle, 10 percent Valero Energy, and 40 percent McDonald's, what is your portfolio return?

Which of these is a measure summarizing the overall past performance of an investment?

Compute the standard deviation of Kohl's monthly returns. The past five monthly returns for Kohl's are 5.55 percent, 8.62 percent, −4.44 percent, −1.52 percent, and 9.75 percent.

Year-to-date, Company O had earned a −2.10 percent return. During the same time period, Company V earned 8.00 percent and Company M earned 6.25 percent. If you have a portfolio made up of 40 percent Company O, 30 percent Company V, and 30 percent Company M, what is your portfolio return?

A stock has an expected return of 12 percent and a standard deviation of 25 percent. Long-term Treasury bonds have an expected return of 5 percent and a standard deviation of 9 percent. Given this data, which of the following statements is correct?

Noble stock was $60.00 per share at the end of last year. Since then, it paid a $2.00 per share dividend last year. The stock price is currently $58. If you owned 400 shares of Noble, what was your percent return?

The standard deviation of the past five monthly returns for K and Company are 2.28 percent, 2.64 percent, −1.05 percent, 4.25 percent, and 9.25 percent. What is the standard deviation?

The standard deviation of the past five monthly returns for PG Company are 2.75 percent, −0.75 percent, 4.15 percent, 6.29 percent, and 3.84 percent. What is the standard deviation?

If you own 300 shares of Alaska Air at $15.88, 250 shares of Best Buy at $151.00, and 1,150 shares of Ford Motor at $3.51, what are the portfolio weights of each stock?

A stock has an expected return of 12 percent and a standard deviation of 20 percent. Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 15 percent. Given this data, which of the following statements is correct?

Which of the following statements is correct?

The past five monthly returns for K and Company are 2.28 percent, 2.64 percent, −1.05 percent, 4.25 percent, and 9.25 percent. What is the average monthly return?

Consider the risk-return relationship in T-bills during each decade since 1950. Given this data, which of the following statements is correct? Decade CoV 1950 0.40 1960 0.33 1970 0.29 1980 0.29 1990 0.24 2000 0.55

Sally wants to invest in only two stocks. Which pair of stocks should Sally select?

An investor owns $10,000 of Adobe Systems stock, $15,000 of Dow Chemical, and $25,000 of Office Depot. What are the portfolio weights of each stock?

An investor owns $8,000 of Adobe Systems stock, $5,000 of Dow Chemical, and $3,000 of Office Depot. What are the portfolio weights of each stock?

Which of these is the dollar return characterized as a percentage of money invested?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters