Question 1

Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:

Accepted Answer

A) -1.0 
B) +1.0 
C) 0.0 
D) none of the above 
A) -1.0 
B) +1.0 
C) 0.0 
D) none of the above A

Question 2

The risk cause by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:

Accepted Answer

A) interest rate risk 
B) business risk 
C) financial risk 
D) purchasing power risk 
E) none of the above 
A) interest rate risk 
B) business risk 
C) financial risk 
D) purchasing power risk 
E) none of the above C

Question 3

A (n)________ portfolio maximizes return for a given level of risk,or minimizes risk for a given level of return.

Accepted Answer

A) efficient 
B) profit maximizing 
C) idiosyncratic 
D) diverse 
E) none of the above 
A) efficient 
B) profit maximizing 
C) idiosyncratic 
D) diverse 
E) none of the above A

Question 4

Which one of the following is not considered to be a generally recognized type of market efficiency?

Accepted Answer

A) strong-form 
B) semi-strong form 
C) weak-form 
D) insider-information form 
A) strong-form 
B) semi-strong form 
C) weak-form 
D) insider-information form

Question 5

The variance of a portfolio would be calculated by finding the variances of the individual components of the portfolio and finding the weighted average of those variances.

Accepted Answer

A) True 
 B)False

Question 6

During the past 75 years,corporate bonds have provided investors with higher average annual returns than stocks.

Accepted Answer

A) True 
 B)False

Question 7

If the _____________ of a stock is known,an investor can use the security market line to determine the expected return on that stock.

Accepted Answer

A) standard deviation 
B) beta 
C) coefficient of variation 
D) unsystematic risk 
A) standard deviation 
B) beta 
C) coefficient of variation 
D) unsystematic risk

Question 8

The ____________ the coefficient of variation,the ____________ the risk.

Accepted Answer

A) lower,lower 
B) higher,lower 
C) lower,higher 
D) more stable,higher 
E) none of the above 
A) lower,lower 
B) higher,lower 
C) lower,higher 
D) more stable,higher 
E) none of the above

Question 9

Unsystematic risk is also known as:

Accepted Answer

A) market risk 
B) nondiversifiable risk 
C) firm-specific risk 
D) macroeconomic risk 
A) market risk 
B) nondiversifiable risk 
C) firm-specific risk 
D) macroeconomic risk

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Between 1928 and 2008,the average annual return on common stocks averaged _____%,while the average annual return on Treasury bonds averaged _____%.

Accepted Answer

A) 11.1,5.4 
B) 11.1,3.8 
C) 11.1,3.2 
D) none of the above 
A) 11.1,5.4 
B) 11.1,3.8 
C) 11.1,3.2 
D) none of the above

Question 12

The risk cause by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:

Accepted Answer

A) interest rate risk 
B) business risk 
C) tax risk 
D) purchasing power risk 
E) none of the above 
A) interest rate risk 
B) business risk 
C) tax risk 
D) purchasing power risk 
E) none of the above

Question 13

Future returns and risk cannot be predicted precisely from past measures.

Accepted Answer

A) True 
 B)False

Question 14

During the onset between 2007 and 2008,the returns on stocks and treasury bonds

Accepted Answer

A) converged 
B) diverged 
C) were about the same 
D) were unrelated 
E) none of the above 
A) converged 
B) diverged 
C) were about the same 
D) were unrelated 
E) none of the above

Question 15

Most market risk can be eliminated through diversification.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) interest rate risk 
B) business risk 
C) tax risk 
D) financial risk 
E) none of the above 
A) interest rate risk 
B) business risk 
C) tax risk 
D) financial risk 
E) none of the above

Question 17

Although gold is a risky investment by itself,including gold in a stock portfolio can make the portfolio less risky.

Accepted Answer

A) True 
 B)False

Question 18

A market system that allows for quick execution of customers' trades is said to be informationally efficient.

Accepted Answer

A) True 
 B)False

Question 19

If the variance for Stock A is greater than the variance for Stock B,then the standard deviation for Stock A:

Accepted Answer

A) is greater than the standard deviation for Stock B 
B) is less than the standard deviation for Stock B 
C) is the same as the standard deviation for stock b 
D) cannot be determined by this information 
A) is greater than the standard deviation for Stock B 
B) is less than the standard deviation for Stock B 
C) is the same as the standard deviation for stock b 
D) cannot be determined by this information

Question 20

In general,securities with higher historical standard deviations have provided higher returns.

Accepted Answer

A) True 
 B)False

Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:

The risk cause by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:

A (n)________ portfolio maximizes return for a given level of risk,or minimizes risk for a given level of return.

Which one of the following is not considered to be a generally recognized type of market efficiency?

The variance of a portfolio would be calculated by finding the variances of the individual components of the portfolio and finding the weighted average of those variances.

During the past 75 years,corporate bonds have provided investors with higher average annual returns than stocks.

If the _____________ of a stock is known,an investor can use the security market line to determine the expected return on that stock.

The the coefficient of variation,the the risk.

Unsystematic risk is also known as:

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

Between 1928 and 2008,the average annual return on common stocks averaged _%,while the average annual return on Treasury bonds averaged _%.

The risk cause by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:

Future returns and risk cannot be predicted precisely from past measures.

During the onset between 2007 and 2008,the returns on stocks and treasury bonds

Most market risk can be eliminated through diversification.

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

Although gold is a risky investment by itself,including gold in a stock portfolio can make the portfolio less risky.

A market system that allows for quick execution of customers' trades is said to be informationally efficient.

If the variance for Stock A is greater than the variance for Stock B,then the standard deviation for Stock A:

In general,securities with higher historical standard deviations have provided higher returns.

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 Valuation

Securities 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

Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:

The risk cause by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:

A (n)________ portfolio maximizes return for a given level of risk,or minimizes risk for a given level of return.

Which one of the following is not considered to be a generally recognized type of market efficiency?

The variance of a portfolio would be calculated by finding the variances of the individual components of the portfolio and finding the weighted average of those variances.

During the past 75 years,corporate bonds have provided investors with higher average annual returns than stocks.

If the _____________ of a stock is known,an investor can use the security market line to determine the expected return on that stock.

The ____________ the coefficient of variation,the ____________ the risk.

Unsystematic risk is also known as:

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

Between 1928 and 2008,the average annual return on common stocks averaged _____%,while the average annual return on Treasury bonds averaged _____%.

The risk cause by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:

Future returns and risk cannot be predicted precisely from past measures.

During the onset between 2007 and 2008,the returns on stocks and treasury bonds

Most market risk can be eliminated through diversification.

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

Although gold is a risky investment by itself,including gold in a stock portfolio can make the portfolio less risky.

A market system that allows for quick execution of customers' trades is said to be informationally efficient.

If the variance for Stock A is greater than the variance for Stock B,then the standard deviation for Stock A:

In general,securities with higher historical standard deviations have provided higher returns.

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 Valuation

Securities 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

The the coefficient of variation,the the risk.

Between 1928 and 2008,the average annual return on common stocks averaged _%,while the average annual return on Treasury bonds averaged _%.