Question 1

The term "ex-ante" refers to the past or historical information.

Accepted Answer

A) True 
 B)False

Question 2

A stock that went from $40 per share at the beginning of the year to $45 at the end of the year and paid a $2 dividend provided an investor with a 14% return.

Accepted Answer

A) True 
 B)False

Question 3

Systematic risk is rewarded with higher returns in the market because:

Accepted Answer

A)  it is associated with market movements which cannot be eliminated through diversification 
B)  it is a microeconomic risk 
C)  that risk is unique to a firm or an industry 
D)  initial capital outlays are higher to purchase the investment 
A)  it is associated with market movements which cannot be eliminated through diversification 
B)  it is a microeconomic risk 
C)  that risk is unique to a firm or an industry 
D)  initial capital outlays are higher to purchase the investment

Question 4

Any predictable trend in the same direction as the price change would be evidence of an efficient market.

Accepted Answer

A) True 
 B)False

Question 5

In comparing the deviations of returns, which one of the following assets has historically had the largest standard deviation of annual returns?

Accepted Answer

A)  large company stocks 
B)  long-term corporate bonds 
C)  long-term government bonds 
D)  U.S. Treasury bills 
A)  large company stocks 
B)  long-term corporate bonds 
C)  long-term government bonds 
D)  U.S. Treasury bills

Question 6

If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:

Accepted Answer

A)  12.4% 
B)  13% 
C)  13.6% 
D)  14.5% 
A)  12.4% 
B)  13% 
C)  13.6% 
D)  14.5%

Question 7

A strong-form efficient market is one in which prices reflect all public knowledge, including past and current information.

Accepted Answer

A) True 
 B)False

Question 8

Standard deviation is the square root of the variance.

Accepted Answer

A) True 
 B)False

Question 9

Correlation is a statistical concept that relates movements in three or more set of returns.

Accepted Answer

A) True 
 B)False

Question 10

Tax risk can be eliminated through diversification.

Accepted Answer

A) True 
 B)False

Question 11

If the expected return is 10%, the standard deviation is 3%, about 95% of the time returns will be expected to fall between 1% and 19%.

Accepted Answer

A) True 
 B)False

Question 12

Standard deviation is stated in the same units of measurement (e.g., dollars, percent) as those of the data from which they were generated.

Accepted Answer

A) True 
 B)False

Question 13

The coefficient of variation is a measure of total return on a stock.

Accepted Answer

A) True 
 B)False

Question 14

The Capital Asset Pricing Model states that the expected return on an asset depends on its level of unsystematic risk.

Accepted Answer

A) True 
 B)False

Question 15

The variance or standard deviation measures the risk per unit of return.

Accepted Answer

A) True 
 B)False

Question 16

In an efficient market, investors cannot consistently earn above average profits after taking risk differences into account.

Accepted Answer

A) True 
 B)False

Question 17

The risk caused by changes in inflation that affect revenues, expenses and profitability is called:

Accepted Answer

A)  financial risk 
B)  business risk 
C)  exchange risk 
D)  purchasing power risk 
A)  financial risk 
B)  business risk 
C)  exchange risk 
D)  purchasing power risk

Question 18

When we speak of ex-ante returns, we are referring to historical information or data.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is most correct?

Accepted Answer

A)  An inefficient portfolio maximizes return for a given level of risk, or minimizes risk for a given level of return. 
B)  A single asset is called a portfolio 
C)  The goal of an inefficient portfolio is to minimize risk for a given level of return. 
D)  Combining negatively correlated assets having the same expected return results in a portfolio with the same level of expected return and a lower level of risk. 
A)  An inefficient portfolio maximizes return for a given level of risk, or minimizes risk for a given level of return. 
B)  A single asset is called a portfolio 
C)  The goal of an inefficient portfolio is to minimize risk for a given level of return. 
D)  Combining negatively correlated assets having the same expected return results in a portfolio with the same level of expected return and a lower level of risk.

Question 20

Shareholders may sell their shares back to the mutual fund at any time.

Accepted Answer

A) True 
 B)False

The term "ex-ante" refers to the past or historical information.

A stock that went from $40 per share at the beginning of the year to $45 at the end of the year and paid a $2 dividend provided an investor with a 14% return.

Systematic risk is rewarded with higher returns in the market because:

Any predictable trend in the same direction as the price change would be evidence of an efficient market.

In comparing the deviations of returns, which one of the following assets has historically had the largest standard deviation of annual returns?

If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:

A strong-form efficient market is one in which prices reflect all public knowledge, including past and current information.

Standard deviation is the square root of the variance.

Correlation is a statistical concept that relates movements in three or more set of returns.

Tax risk can be eliminated through diversification.

If the expected return is 10%, the standard deviation is 3%, about 95% of the time returns will be expected to fall between 1% and 19%.

Standard deviation is stated in the same units of measurement (e.g., dollars, percent) as those of the data from which they were generated.

The coefficient of variation is a measure of total return on a stock.

The Capital Asset Pricing Model states that the expected return on an asset depends on its level of unsystematic risk.

The variance or standard deviation measures the risk per unit of return.

In an efficient market, investors cannot consistently earn above average profits after taking risk differences into account.

The risk caused by changes in inflation that affect revenues, expenses and profitability is called:

When we speak of ex-ante returns, we are referring to historical information or data.

Which of the following statements is most correct?

Shareholders may sell their shares back to the mutual fund at any time.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 12: Financial Return and Risk Concepts

The term "ex-ante" refers to the past or historical information.

A stock that went from $40 per share at the beginning of the year to $45 at the end of the year and paid a $2 dividend provided an investor with a 14% return.

Systematic risk is rewarded with higher returns in the market because:

Any predictable trend in the same direction as the price change would be evidence of an efficient market.

In comparing the deviations of returns, which one of the following assets has historically had the largest standard deviation of annual returns?

If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:

A strong-form efficient market is one in which prices reflect all public knowledge, including past and current information.

Standard deviation is the square root of the variance.

Correlation is a statistical concept that relates movements in three or more set of returns.

Tax risk can be eliminated through diversification.

If the expected return is 10%, the standard deviation is 3%, about 95% of the time returns will be expected to fall between 1% and 19%.

Standard deviation is stated in the same units of measurement (e.g., dollars, percent) as those of the data from which they were generated.

The coefficient of variation is a measure of total return on a stock.

The Capital Asset Pricing Model states that the expected return on an asset depends on its level of unsystematic risk.

The variance or standard deviation measures the risk per unit of return.

In an efficient market, investors cannot consistently earn above average profits after taking risk differences into account.

The risk caused by changes in inflation that affect revenues, expenses and profitability is called:

When we speak of ex-ante returns, we are referring to historical information or data.

Which of the following statements is most correct?

Shareholders may sell their shares back to the mutual fund at any time.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters