Question 1

The effect on revenues and expenses from variations in the value of the U.S.dollar in terms of other currencies is called:

Accepted Answer

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

Question 2

According to the definitions given in the text,if Stock A has a standard deviation of 4% and expected returns of 9%,and Stock B has a standard deviation of 3% and returns of 1%,which stock is riskier?

Accepted Answer

A) Stock A 
B) Stock B 
C) they are equally risky 
D) cannot determine from the information given 
A) Stock A 
B) Stock B 
C) they are equally risky 
D) cannot determine from the information given

Question 3

Diversification occurs when we invest in several different assets rather than just a single one.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not a component of the security market line equation?

Accepted Answer

A) risk-free rate 
B) expected return on the market 
C) an asset's systematic risk 
D) an asset's unsystematic risk 
A) risk-free rate 
B) expected return on the market 
C) an asset's systematic risk 
D) an asset's unsystematic risk

Question 5

The expected rate of return on a portfolio is the weighted average of the expected returns of the individual assets in the portfolio.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is most correct?

Accepted Answer

A) Perfectly negatively correlated series move exactly together and have a correlation coefficient of -1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of +1.0. 
B) Perfectly negatively correlated series move exactly together and have a correlation coefficient of +1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0. 
C) Perfectly positively correlated series move exactly opposite one another and have a correlation coefficient of +1.0 while perfectly negatively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0. 
D) Perfectly positively correlated series move exactly together and have a correlation coefficient of -1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of +1.0. 
E) none of the above 
A) Perfectly negatively correlated series move exactly together and have a correlation coefficient of -1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of +1.0. 
B) Perfectly negatively correlated series move exactly together and have a correlation coefficient of +1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0. 
C) Perfectly positively correlated series move exactly opposite one another and have a correlation coefficient of +1.0 while perfectly negatively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0. 
D) Perfectly positively correlated series move exactly together and have a correlation coefficient of -1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of +1.0. 
E) none of the above

Question 7

Which of the following statements is most correct?

Accepted Answer

A) The probability of an event occurring is the percentage of a given outcome. 
B) A continuous probability distribution shows all possible outcomes and associated probabilities for a given event. 
C) The standard deviation measures the dispersion around the expected value. 
D) The coefficient of variation is a measure of relative dispersion used in comparing the risk of assets with differing expected returns. 
E) all of the above 
A) The probability of an event occurring is the percentage of a given outcome. 
B) A continuous probability distribution shows all possible outcomes and associated probabilities for a given event. 
C) The standard deviation measures the dispersion around the expected value. 
D) The coefficient of variation is a measure of relative dispersion used in comparing the risk of assets with differing expected returns. 
E) all of the above

Question 8

An aggressive portfolio would have a beta of:

Accepted Answer

A) 1 
B) 0 
C) less than 1 
D) more than 1 
A) 1 
B) 0 
C) less than 1 
D) more than 1

Question 9

A weak-form efficient market is a market in which prices reflect all past information.

Accepted Answer

A) True 
 B)False

Question 10

If standard deviation is used to measure the risk of stocks,one problem that arises is the inability to tell which stock is riskier by looking at the standard deviation alone.

Accepted Answer

A) True 
 B)False

Question 11

The effect on revenues and expenses from variations in the value of the U.S.dollar in terms of other currencies is called:

Accepted Answer

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

Question 12

The Capital Asset Pricing Model (CAPM)states that the expected return on an asset depends upon its level of:

Accepted Answer

A) systematic risk 
B) unsystematic risk 
C) beta 
D) two of the above 
E) none of the above 
A) systematic risk 
B) unsystematic risk 
C) beta 
D) two of the above 
E) none of the above

Question 13

Standard deviation is stated in the same units of measurement as those of the data from which they were generated.

Accepted Answer

A) True 
 B)False

Question 14

Variations in operating income over time because of variations in unit sales,price,cost margins,and/or fixed expenses are called:

Accepted Answer

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

Question 15

Asset A has a coefficient of variation of 1.2 and asset B has a coefficient of variation of 1.0.Based on this information,an individual would choose asset ____ if he or she wishes to maximize return for a given level of risk.

Accepted Answer

A) A 
B) B 
C) either A or B 
D) none of the above 
A) A 
B) B 
C) either A or B 
D) none of the above

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

In an efficient market,investors cannot consistently earn above average profits.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is most correct?

Accepted Answer

A) the variance of a portfolio is a weighted average of asset variances. 
B) the benefits of diversification are greatest when asset returns have zero correlations. 
C) the market portfolio truly eliminates all unsystematic risk. 
D) beta is the measure of an asset's unsystematic risk. 
A) the variance of a portfolio is a weighted average of asset variances. 
B) the benefits of diversification are greatest when asset returns have zero correlations. 
C) the market portfolio truly eliminates all unsystematic risk. 
D) beta is the measure of an asset's unsystematic risk.

Question 19

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

Accepted Answer

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

Question 20

If a financial asset has a historical variance of 16%,then its standard deviation must be 4%.

Accepted Answer

A) True 
 B)False

The effect on revenues and expenses from variations in the value of the U.S.dollar in terms of other currencies is called:

According to the definitions given in the text,if Stock A has a standard deviation of 4% and expected returns of 9%,and Stock B has a standard deviation of 3% and returns of 1%,which stock is riskier?

Diversification occurs when we invest in several different assets rather than just a single one.

Which of the following is not a component of the security market line equation?

The expected rate of return on a portfolio is the weighted average of the expected returns of the individual assets in the portfolio.

Which of the following statements is most correct?

Which of the following statements is most correct?

An aggressive portfolio would have a beta of:

A weak-form efficient market is a market in which prices reflect all past information.

If standard deviation is used to measure the risk of stocks,one problem that arises is the inability to tell which stock is riskier by looking at the standard deviation alone.

The effect on revenues and expenses from variations in the value of the U.S.dollar in terms of other currencies is called:

The Capital Asset Pricing Model (CAPM)states that the expected return on an asset depends upon its level of:

Standard deviation is stated in the same units of measurement as those of the data from which they were generated.

Variations in operating income over time because of variations in unit sales,price,cost margins,and/or fixed expenses are called:

Asset A has a coefficient of variation of 1.2 and asset B has a coefficient of variation of 1.0.Based on this information,an individual would choose asset ____ if he or she wishes to maximize return for a given level of risk.

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

In an efficient market,investors cannot consistently earn above average profits.

Which of the following statements is most correct?

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

If a financial asset has a historical variance of 16%,then its standard deviation must be 4%.

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

The effect on revenues and expenses from variations in the value of the U.S.dollar in terms of other currencies is called:

According to the definitions given in the text,if Stock A has a standard deviation of 4% and expected returns of 9%,and Stock B has a standard deviation of 3% and returns of 1%,which stock is riskier?

Diversification occurs when we invest in several different assets rather than just a single one.

Which of the following is not a component of the security market line equation?

The expected rate of return on a portfolio is the weighted average of the expected returns of the individual assets in the portfolio.

Which of the following statements is most correct?

Which of the following statements is most correct?

An aggressive portfolio would have a beta of:

A weak-form efficient market is a market in which prices reflect all past information.

If standard deviation is used to measure the risk of stocks,one problem that arises is the inability to tell which stock is riskier by looking at the standard deviation alone.

The effect on revenues and expenses from variations in the value of the U.S.dollar in terms of other currencies is called:

The Capital Asset Pricing Model (CAPM)states that the expected return on an asset depends upon its level of:

Standard deviation is stated in the same units of measurement as those of the data from which they were generated.

Variations in operating income over time because of variations in unit sales,price,cost margins,and/or fixed expenses are called:

Asset A has a coefficient of variation of 1.2 and asset B has a coefficient of variation of 1.0.Based on this information,an individual would choose asset ____ if he or she wishes to maximize return for a given level of risk.

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

In an efficient market,investors cannot consistently earn above average profits.

Which of the following statements is most correct?

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

If a financial asset has a historical variance of 16%,then its standard deviation must be 4%.

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