Question 1

An ordinary annuity is a _____ series of _____ cash.

Accepted Answer

A)  finite, constant 
B)  finite, growing 
C)  infinite, constant 
D)  infinite, growing 
A)  finite, constant 
B)  finite, growing 
C)  infinite, constant 
D)  infinite, growing A

Question 2

The fact that most investors are risk averse means they will

Accepted Answer

A)  only take risks for which they are properly rewarded 
B)  not take a risk 
C)  not voluntarily take a risk 
D)  not take a risk unless they know the outcome in advance 
A)  only take risks for which they are properly rewarded 
B)  not take a risk 
C)  not voluntarily take a risk 
D)  not take a risk unless they know the outcome in advance A

Question 3

If the variance of x is 0.10, what is the variance of 2x?

Accepted Answer

A)  0.05 
B)  0.10 
C)  0.20 
D)  0.40 
A)  0.05 
B)  0.10 
C)  0.20 
D)  0.40 D

Question 4

The _____ the dispersion in a series of numbers, the ____ the gap between the arithmetic and geometric mean.

Accepted Answer

A)  greater, greater 
B)  greater, smaller 
C)  smaller, greater 
D)  more predictable, less predictable 
A)  greater, greater 
B)  greater, smaller 
C)  smaller, greater 
D)  more predictable, less predictable

Question 5

Using a discount rate of 8% per year, what is the present value of an annuity due of $100 per year with 10 payments?

Accepted Answer

A)  $725 
B)  $559 
C)  $793 
D)  $772 
A)  $725 
B)  $559 
C)  $793 
D)  $772

Question 6

The variance of x is 25. What is the variance of 2x?

Accepted Answer

A)  25 
B)  50 
C)  75 
D)  100 
A)  25 
B)  50 
C)  75 
D)  100

Question 7

Return is the

Accepted Answer

A)  benefit associated with an investment 
B)  realized gain from an investment 
C)  realized and unrealized gain from an investment 
D)  measurable gain from an investment 
A)  benefit associated with an investment 
B)  realized gain from an investment 
C)  realized and unrealized gain from an investment 
D)  measurable gain from an investment

Question 8

Total risk can be measured by all of the following except

Accepted Answer

A)  variance 
B)  standard deviation 
C)  semi-variance 
D)  arithmetic mean 
A)  variance 
B)  standard deviation 
C)  semi-variance 
D)  arithmetic mean

Question 9

Using semivariance to measure risk is appropriate if the return distribution is

Accepted Answer

A)  symmetrical 
B)  not symmetrical 
C)  normally distributed 
D)  uniformly distributed 
A)  symmetrical 
B)  not symmetrical 
C)  normally distributed 
D)  uniformly distributed

Question 10

If a distribution shows more possible outcomes on one side of the mean than the other, the distribution shows

Accepted Answer

A)  uniformity 
B)  normal characteristics 
C)  random characteristics 
D)  skewness 
A)  uniformity 
B)  normal characteristics 
C)  random characteristics 
D)  skewness

Question 11

Assume the risk-free rate is constant over time. The correlation between the return on security x and the return on the risk-free asset is

Accepted Answer

A)  negative 
B)  positive 
C)  zero 
D)  cannot be determined without further information 
A)  negative 
B)  positive 
C)  zero 
D)  cannot be determined without further information

Question 12

The minimum value of the correlation coefficient is

Accepted Answer

A)  -1 
B)  0 
C)  +1 
D)  there is no minimum value 
A)  -1 
B)  0 
C)  +1 
D)  there is no minimum value

Question 13

Risk is often measured as

Accepted Answer

A)  central tendency of returns 
B)  dispersion of returns 
C)  expected value of returns 
D)  possibility of negative returns 
A)  central tendency of returns 
B)  dispersion of returns 
C)  expected value of returns 
D)  possibility of negative returns

Question 14

Which of the following statements is true?

Accepted Answer

A)  Some people are risk averse and others are not 
B)  Some people are more risk averse than others 
C)  Risk averse people will not take a risk 
D)  Risk averse people are willing to settle for less return than risk neutral people 
A)  Some people are risk averse and others are not 
B)  Some people are more risk averse than others 
C)  Risk averse people will not take a risk 
D)  Risk averse people are willing to settle for less return than risk neutral people

Question 15

The winner of a state lottery usually receives a(n)

Accepted Answer

A)  ordinary annuity 
B)  annuity due 
C)  growing annuity 
D)  perpetuity 
A)  ordinary annuity 
B)  annuity due 
C)  growing annuity 
D)  perpetuity

Question 16

In economic theory, if money is not saved, it is

Accepted Answer

A)  consumed 
B)  invested 
C)  unrealized 
D)  deferred 
A)  consumed 
B)  invested 
C)  unrealized 
D)  deferred

Question 17

A jar contains a mixture of coins; you need a quarter. From your perspective, the distribution of coins in the jar is univariate

Accepted Answer

A)  bivariate 
B)  trivariate 
C)  multivariate 
A)  bivariate 
B)  trivariate 
C)  multivariate

Question 18

A holding period return should only be compared with returns calculated

Accepted Answer

A)  over shorter periods 
B)  over longer periods 
C)  over periods of the same length 
D)  over periods of the same length or less 
A)  over shorter periods 
B)  over longer periods 
C)  over periods of the same length 
D)  over periods of the same length or less

Question 19

The holding period return is calculated as

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 20

A variable whose value is based on the value of other variables is a(n)

Accepted Answer

A)  independent variable 
B)  dependent variable 
C)  stochastic variable 
D)  estimated variable 
A)  independent variable 
B)  dependent variable 
C)  stochastic variable 
D)  estimated variable

Exam 2: Valuation, Risk, Return, and Uncertainty

An ordinary annuity is a _____ series of _____ cash.

The fact that most investors are risk averse means they will

If the variance of x is 0.10, what is the variance of 2x?

The _____ the dispersion in a series of numbers, the ____ the gap between the arithmetic and geometric mean.

Using a discount rate of 8% per year, what is the present value of an annuity due of $100 per year with 10 payments?

The variance of x is 25. What is the variance of 2x?

Return is the

Total risk can be measured by all of the following except

Using semivariance to measure risk is appropriate if the return distribution is

If a distribution shows more possible outcomes on one side of the mean than the other, the distribution shows

Assume the risk-free rate is constant over time. The correlation between the return on security x and the return on the risk-free asset is

The minimum value of the correlation coefficient is

Risk is often measured as

Which of the following statements is true?

The winner of a state lottery usually receives a(n)

In economic theory, if money is not saved, it is

A jar contains a mixture of coins; you need a quarter. From your perspective, the distribution of coins in the jar is univariate

A holding period return should only be compared with returns calculated

The holding period return is calculated as

A variable whose value is based on the value of other variables is a(n)

The Process of Portfolio Management

Setting Portfolio Objectives

Investment Policy

The Mathematics of Diversification

Why Diversification Is a Good Idea

International Investment and Diversification

The Capital Markets and Market Efficiency

Picking the Equity Players

Equity Valuation Tools

Security Screening

Bond Pricing and Selection

The Role of Real Assets

Alternative Assets

Revision of the Equity Portfolio

Revision of the Fixed-Income Portfolio

Principles of Options and Option Pricing

Option Overwriting

Performance Evaluation

Fiduciary Duties and Responsibilities

Principles of the Futures Market

Benching the Equity Players

Removing Interest Rate Risk

Integrating Derivative Assets and Portfolio Management

Contemporary Issues in Portfolio Management

Filters

An ordinary annuity is a _ series of _ cash.

The _ the dispersion in a series of numbers, the the gap between the arithmetic and geometric mean.