Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The risk of a portfolio is simply equal to the weighted average return of the securities that comprise it.

Accepted Answer

A) True 
 B)False

Question 3

The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.

Accepted Answer

A) True 
 B)False

Question 4

In an efficient market which of the following would not be expected to cause a quick price change in the stock of a company?

Accepted Answer

A) an unexpected announcement by a major competitor 
B) higher than predicted earnings announcement 
C) unexpected death of CEO 
D) all the above would be expected to cause a quick price change 
A) an unexpected announcement by a major competitor 
B) higher than predicted earnings announcement 
C) unexpected death of CEO 
D) all the above would be expected to cause a quick price change

Question 5

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. 
E) all of the above 
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. 
E) all of the above

Question 6

If a market is semi-strong form efficient,it also is by definition weak-form efficient.

Accepted Answer

A) True 
 B)False

Question 7

The portfolio that contains all risky assets is known as the:

Accepted Answer

A) market portfolio 
B) efficient portfolio 
C) efficient frontier 
D) value-weighted portfolio 
A) market portfolio 
B) efficient portfolio 
C) efficient frontier 
D) value-weighted portfolio

Question 8

In an efficient market,expected and unexpected news should cause stock prices to move up or down.

Accepted Answer

A) True 
 B)False

Question 9

If Stock A has a higher standard deviation than Stock B,it will also have a greater coefficient of variation.

Accepted Answer

A) True 
 B)False

Question 10

If one were to rank different assets from highest to lowest the basis of average historical return,the ranking would be:

Accepted Answer

A) long-term corporate bonds,large company stocks,long term government bonds,small company stocks,US Treasury bills 
B) small company stocks,large company stocks,long-term corporate bonds,long term government bonds,US Treasury bills 
C) US Treasury bills,long term government bonds,long term corporate bonds,large company stocks,small company stocks 
D) none of the above 
A) long-term corporate bonds,large company stocks,long term government bonds,small company stocks,US Treasury bills 
B) small company stocks,large company stocks,long-term corporate bonds,long term government bonds,US Treasury bills 
C) US Treasury bills,long term government bonds,long term corporate bonds,large company stocks,small company stocks 
D) none of the above

Question 11

If a person requires greater return when risk increases,that person is said to be:

Accepted Answer

A) risk seeking 
B) risk diverse 
C) risk aware 
D) risk indifferent 
E) none of the above 
A) risk seeking 
B) risk diverse 
C) risk aware 
D) risk indifferent 
E) none of the above

Question 12

The total risk of a well-diversified portfolio of U.S.stocks appears to be about what proportion of the risk of an average one-stock portfolio?

Accepted Answer

A) one-third 
B) one-half 
C) two-thirds 
D) three-fourths 
A) one-third 
B) one-half 
C) two-thirds 
D) three-fourths

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 5.0% 
C) 12.7% and 4.0% 
D) 12.0% and 5.0% 
E) none of the above 
A) 12.0% and 4.0% 
B) 12.7% and 5.0% 
C) 12.7% and 4.0% 
D) 12.0% and 5.0% 
E) none of the above

Question 16

Portfolio risk is comprised of:

Accepted Answer

A) systematic and market risk 
B) unsystematic and microeconomic risk 
C) systematic and unsystematic risk 
D) systematic and macroeconomic risk 
A) systematic and market risk 
B) unsystematic and microeconomic risk 
C) systematic and unsystematic risk 
D) systematic and macroeconomic risk

Question 17

During the onset of the Financial Crisis between 2007 and 2008,an investor would have earned the greatest return if he or she had invested in

Accepted Answer

A) only stocks 
B) only Treasury bonds 
C) a portfolio consisting of 50% stocks and 50% Treasury bonds 
D) a non-interest bearing cash account 
E) none of the above 
A) only stocks 
B) only Treasury bonds 
C) a portfolio consisting of 50% stocks and 50% Treasury bonds 
D) a non-interest bearing cash account 
E) none of the above

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

In general,large company stocks are less risky than small company stocks.

Accepted Answer

A) True 
 B)False

Question 20

The correlation between the return on the risk-free asset and the return on a risky asset is always:

Accepted Answer

A) -1 
B) 0 
C) 1 
D) 0.5 
A) -1 
B) 0 
C) 1 
D) 0.5

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

The risk of a portfolio is simply equal to the weighted average return of the securities that comprise it.

The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.

In an efficient market which of the following would not be expected to cause a quick price change in the stock of a company?

Which of the following statements is most correct?

If a market is semi-strong form efficient,it also is by definition weak-form efficient.

The portfolio that contains all risky assets is known as the:

In an efficient market,expected and unexpected news should cause stock prices to move up or down.

If Stock A has a higher standard deviation than Stock B,it will also have a greater coefficient of variation.

If one were to rank different assets from highest to lowest the basis of average historical return,the ranking would be:

If a person requires greater return when risk increases,that person is said to be:

The total risk of a well-diversified portfolio of U.S.stocks appears to be about what proportion of the risk of an average one-stock portfolio?

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

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

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:

Portfolio risk is comprised of:

During the onset of the Financial Crisis between 2007 and 2008,an investor would have earned the greatest return if he or she had invested in

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

In general,large company stocks are less risky than small company stocks.

The correlation between the return on the risk-free asset and the return on a risky asset is always:

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

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

The risk of a portfolio is simply equal to the weighted average return of the securities that comprise it.

The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.

In an efficient market which of the following would not be expected to cause a quick price change in the stock of a company?

Which of the following statements is most correct?

If a market is semi-strong form efficient,it also is by definition weak-form efficient.

The portfolio that contains all risky assets is known as the:

In an efficient market,expected and unexpected news should cause stock prices to move up or down.

If Stock A has a higher standard deviation than Stock B,it will also have a greater coefficient of variation.

If one were to rank different assets from highest to lowest the basis of average historical return,the ranking would be:

If a person requires greater return when risk increases,that person is said to be:

The total risk of a well-diversified portfolio of U.S.stocks appears to be about what proportion of the risk of an average one-stock portfolio?

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

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

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:

Portfolio risk is comprised of:

During the onset of the Financial Crisis between 2007 and 2008,an investor would have earned the greatest return if he or she had invested in

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

In general,large company stocks are less risky than small company stocks.

The correlation between the return on the risk-free asset and the return on a risky asset is always:

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