Question 1

If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the market portfolio is 18%,the expected return on IBM is:

Accepted Answer

A) 17.2% 
B) 20.4% 
C) 22.1% 
D) 23.6% 
A) 17.2% 
B) 20.4% 
C) 22.1% 
D) 23.6%

Question 2

An asset's beta can be estimated by regressing its returns against the returns for the market portfolio.

Accepted Answer

A) True 
 B)False

Question 3

The strong-form efficient market implies that:

Accepted Answer

A) no investors can consistently beat the market 
B) stock prices reflect all public and private knowledge 
C) even corporate officers and insiders cannot earn above-average,risk-adjusted profits 
D) more than one of the above 
A) no investors can consistently beat the market 
B) stock prices reflect all public and private knowledge 
C) even corporate officers and insiders cannot earn above-average,risk-adjusted profits 
D) more than one of the above

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

The coefficient of variation measures the risk per unit of return.

Accepted Answer

A) True 
 B)False

Question 6

During the past 75 years,small company stocks have provided investors with higher average annual returns than large company stocks.

Accepted Answer

A) True 
 B)False

Question 7

Research on the weak-form efficient market suggests that:

Accepted Answer

A) past trends cannot be used to predict the future 
B) technical analysis has limited value 
C) stock prices follow a random walk 
D) more than one of the above 
A) past trends cannot be used to predict the future 
B) technical analysis has limited value 
C) stock prices follow a random walk 
D) more than one of the above

Question 8

Unsystematic risk is the risk that cannot be eliminated through diversification.

Accepted Answer

A) True 
 B)False

Question 9

If the market rate of return is 12%,and the beta on Consolidated Edison is .8,the return on Con Ed is:

Accepted Answer

A) greater than 12% 
B) less than 12% 
C) greater or less than 12%,depending on the risk-free rate of return 
D) dependent on some other factors 
A) greater than 12% 
B) less than 12% 
C) greater or less than 12%,depending on the risk-free rate of return 
D) dependent on some other factors

Question 10

The market portfolio would have a beta of:

Accepted Answer

A) 0 
B) 1 
C) -1 
D) 0.8 
A) 0 
B) 1 
C) -1 
D) 0.8

Question 11

Assume the probability of a pessimistic,most likely and optimistic state of nature is .25,.45 and .30,and the returns associated with those states of nature are 10%,12%,and 16% for asset X.Based on this information,the expected return and standard deviation of return are:

Accepted Answer

A) 12.0% and 4.0% 
B) 12.7% and 2.3% 
C) 12.7% and 4.0% 
D) 12.0% and 2.3% 
E) none of the above 
A) 12.0% and 4.0% 
B) 12.7% and 2.3% 
C) 12.7% and 4.0% 
D) 12.0% and 2.3% 
E) none of the above

Question 12

A higher coefficient of variation indicates more risk per unit of return.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is most correct?

Accepted Answer

A) the U.S.stock market appears to be a fairly good example of a semi-strong form efficient market. 
B) a market in which prices reflect all past and current publicly known information is a strong form efficient market. 
C) a weak-form efficient market implies that technical analysis can be used to predict future price movements. 
D) All of the above statements are correct. 
A) the U.S.stock market appears to be a fairly good example of a semi-strong form efficient market. 
B) a market in which prices reflect all past and current publicly known information is a strong form efficient market. 
C) a weak-form efficient market implies that technical analysis can be used to predict future price movements. 
D) All of the above statements are correct.

Question 14

Which of the following statements is most correct?

Accepted Answer

A) mutual fund shares are traded either on an organized exchange or in the over-the-counter market. 
B) mutual funds continually sell shares to investors,and shareholders may sell their shares back to the mutual fund at any time. 
C) mutual funds can only invest in equity. 
D) all of the above statements are correct. 
A) mutual fund shares are traded either on an organized exchange or in the over-the-counter market. 
B) mutual funds continually sell shares to investors,and shareholders may sell their shares back to the mutual fund at any time. 
C) mutual funds can only invest in equity. 
D) all of the above statements are correct.

Question 15

Variations in a firm's tax rate and tax-related charges over time due to changing tax laws and regulations is called:

Accepted Answer

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

Question 16

Which of the following statements is most correct?

Accepted Answer

A) The improbability of an event occurring is the percentage of a given outcome. 
B) A skewed probability distribution shows all possible outcomes and associated probabilities for a given event. 
C) The standard evaluation measures the dispersion around the expected value. 
D) The constant of variation is a measure of relative dispersion used in comparing the risk of assets with differing expected returns. 
E) none of the above 
A) The improbability of an event occurring is the percentage of a given outcome. 
B) A skewed probability distribution shows all possible outcomes and associated probabilities for a given event. 
C) The standard evaluation measures the dispersion around the expected value. 
D) The constant of variation is a measure of relative dispersion used in comparing the risk of assets with differing expected returns. 
E) none of the above

Question 17

If Stock A had a price of $120 at the beginning of the year,$150 at the end of the year and paid a $6 dividend during the year,what would be the annualized holding period return?

Accepted Answer

A) 36% 
B) 30% 
C) 24% 
D) none of the above 
A) 36% 
B) 30% 
C) 24% 
D) none of the above

Question 18

Which one of the following assets has historically had the highest average annual return?

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 19

The benefits of diversification are greatest when asset returns have positive correlations.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the market portfolio is 18%,the expected return on IBM is:

An asset's beta can be estimated by regressing its returns against the returns for the market portfolio.

The strong-form efficient market implies that:

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

The coefficient of variation measures the risk per unit of return.

During the past 75 years,small company stocks have provided investors with higher average annual returns than large company stocks.

Research on the weak-form efficient market suggests that:

Unsystematic risk is the risk that cannot be eliminated through diversification.

If the market rate of return is 12%,and the beta on Consolidated Edison is .8,the return on Con Ed is:

The market portfolio would have a beta of:

Assume the probability of a pessimistic,most likely and optimistic state of nature is .25,.45 and .30,and the returns associated with those states of nature are 10%,12%,and 16% for asset X.Based on this information,the expected return and standard deviation of return are:

A higher coefficient of variation indicates more risk per unit of return.

Which of the following statements is most correct?

Which of the following statements is most correct?

Variations in a firm's tax rate and tax-related charges over time due to changing tax laws and regulations is called:

Which of the following statements is most correct?

If Stock A had a price of $120 at the beginning of the year,$150 at the end of the year and paid a $6 dividend during the year,what would be the annualized holding period return?

Which one of the following assets has historically had the highest average annual return?

The benefits of diversification are greatest when asset returns have positive correlations.

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

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

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Exam 12: Financial Return and Risk Concepts

If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the market portfolio is 18%,the expected return on IBM is:

An asset's beta can be estimated by regressing its returns against the returns for the market portfolio.

The strong-form efficient market implies that:

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

The coefficient of variation measures the risk per unit of return.

During the past 75 years,small company stocks have provided investors with higher average annual returns than large company stocks.

Research on the weak-form efficient market suggests that:

Unsystematic risk is the risk that cannot be eliminated through diversification.

If the market rate of return is 12%,and the beta on Consolidated Edison is .8,the return on Con Ed is:

The market portfolio would have a beta of:

Assume the probability of a pessimistic,most likely and optimistic state of nature is .25,.45 and .30,and the returns associated with those states of nature are 10%,12%,and 16% for asset X.Based on this information,the expected return and standard deviation of return are:

A higher coefficient of variation indicates more risk per unit of return.

Which of the following statements is most correct?

Which of the following statements is most correct?

Variations in a firm's tax rate and tax-related charges over time due to changing tax laws and regulations is called:

Which of the following statements is most correct?

If Stock A had a price of $120 at the beginning of the year,$150 at the end of the year and paid a $6 dividend during the year,what would be the annualized holding period return?

Which one of the following assets has historically had the highest average annual return?

The benefits of diversification are greatest when asset returns have positive correlations.

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

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