Question 1

Which of the following firms is likely to exhibit the least macro risk exposure?

Accepted Answer

A)  furniture manufacturer 
B)  oil driller 
C)  dog food processor 
D)  auto manufacturer 
A)  furniture manufacturer 
B)  oil driller 
C)  dog food processor 
D)  auto manufacturer

Question 2

What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000,has an 8 percent coupon,and was sold for $960 when the inflation rate was 6 percent?

Accepted Answer

A)  -1.89 percent 
B)  1.92 percent 
C)  5.66 percent 
D)  11.47 percent 
A)  -1.89 percent 
B)  1.92 percent 
C)  5.66 percent 
D)  11.47 percent

Question 3

If a stock's returns are volatile,then the stock:

Accepted Answer

A)  cannot be considered a negative risk asset. 
B)  can still be considered a negative risk asset. 
C)  has macro risk, but no unique risk. 
D)  does not offer diversification potential. 
A)  cannot be considered a negative risk asset. 
B)  can still be considered a negative risk asset. 
C)  has macro risk, but no unique risk. 
D)  does not offer diversification potential.

Question 4

When viewing the long-term trend of volatility in Canadian stocks,it is readily apparent that:

Accepted Answer

A)  volatility has continually increased. 
B)  volatility has continually decreased. 
C)  volatility has offered little discernible trend. 
D)  volatility has remained constant for years. 
A)  volatility has continually increased. 
B)  volatility has continually decreased. 
C)  volatility has offered little discernible trend. 
D)  volatility has remained constant for years.

Question 5

A firm is said to be countercyclical if its returns:

Accepted Answer

A)  continue to decrease, year after year. 
B)  continue to increase, year after year. 
C)  are better when most firms do poorly. 
D)  are negative in real terms. 
A)  continue to decrease, year after year. 
B)  continue to increase, year after year. 
C)  are better when most firms do poorly. 
D)  are negative in real terms.

Question 6

Calculate the real rate of interest if the nominal rate of interest is 9.3% and the inflation rate is 3.25%.

Accepted Answer

A)  7.86% 
B)  6.86% 
C)  5.86% 
D)  4.86% 
A)  7.86% 
B)  6.86% 
C)  5.86% 
D)  4.86%

Question 7

If a share of stock provided a 14.0 percent nominal rate of return over the previous year while the real rate of return was 6.0 percent,then the inflation rate was:

Accepted Answer

A)  1.89 percent. 
B)  7.55 percent. 
C)  8.00 percent. 
D)  9.12 percent. 
A)  1.89 percent. 
B)  7.55 percent. 
C)  8.00 percent. 
D)  9.12 percent.

Question 8

Market risk can be eliminated in a stock portfolio through diversification.

Accepted Answer

A) True 
 B)False

Question 9

Define the term "risk" and explain how it is related to the expected return.

Accepted Answer

Risk is the chance that the ac

Question 10

What is the typical relationship between the standard deviation of an individual common stock and the standard deviation of a diversified portfolio of common stocks?

Accepted Answer

A)  individual stock's standard deviation will be lower 
B)  individual stock's standard deviation will be higher 
C)  the standard deviations should be equal 
D)  there is no way to predict this relationship 
A)  individual stock's standard deviation will be lower 
B)  individual stock's standard deviation will be higher 
C)  the standard deviations should be equal 
D)  there is no way to predict this relationship

Question 11

Which of the following companies might you expect to be exposed to less macro risk?

Accepted Answer

A)  a large producer of flour 
B)  a regional airline 
C)  a major commercial bank 
D)  an electric utility 
A)  a large producer of flour 
B)  a regional airline 
C)  a major commercial bank 
D)  an electric utility

Question 12

Which statement is correct concerning macro risk exposure?

Accepted Answer

A)  all firms face equal macro risk exposure 
B)  only portfolios of stocks face macro risk exposure 
C)  macro risk exposure affects the cost of capital 
D)  macro risk exposure is less important to diversified investors than micro risk exposure 
A)  all firms face equal macro risk exposure 
B)  only portfolios of stocks face macro risk exposure 
C)  macro risk exposure affects the cost of capital 
D)  macro risk exposure is less important to diversified investors than micro risk exposure

Question 13

In a year in which common stocks offered an average return of 18 percent,Treasury bonds offered 10 percent and Treasury bills offered 7 percent,the risk premium for common stocks was:

Accepted Answer

A)  1 percent. 
B)  3 percent. 
C)  8 percent. 
D)  11 percent. 
A)  1 percent. 
B)  3 percent. 
C)  8 percent. 
D)  11 percent.

Which of the following firms is likely to exhibit the least macro risk exposure?

What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000,has an 8 percent coupon,and was sold for $960 when the inflation rate was 6 percent?

If a stock's returns are volatile,then the stock:

When viewing the long-term trend of volatility in Canadian stocks,it is readily apparent that:

A firm is said to be countercyclical if its returns:

Calculate the real rate of interest if the nominal rate of interest is 9.3% and the inflation rate is 3.25%.

If a share of stock provided a 14.0 percent nominal rate of return over the previous year while the real rate of return was 6.0 percent,then the inflation rate was:

Market risk can be eliminated in a stock portfolio through diversification.

Define the term "risk" and explain how it is related to the expected return.

What is the typical relationship between the standard deviation of an individual common stock and the standard deviation of a diversified portfolio of common stocks?

Which of the following companies might you expect to be exposed to less macro risk?

Which statement is correct concerning macro risk exposure?

In a year in which common stocks offered an average return of 18 percent,Treasury bonds offered 10 percent and Treasury bills offered 7 percent,the risk premium for common stocks was:

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, IPOs, and Seasoned Offerings

Debt and Payout Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters

Exam 11: Introduction to Risk, Return, and the Opportunity Cost of Capital

Which of the following firms is likely to exhibit the least macro risk exposure?

What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000,has an 8 percent coupon,and was sold for $960 when the inflation rate was 6 percent?

If a stock's returns are volatile,then the stock:

When viewing the long-term trend of volatility in Canadian stocks,it is readily apparent that:

A firm is said to be countercyclical if its returns:

Calculate the real rate of interest if the nominal rate of interest is 9.3% and the inflation rate is 3.25%.

If a share of stock provided a 14.0 percent nominal rate of return over the previous year while the real rate of return was 6.0 percent,then the inflation rate was:

Market risk can be eliminated in a stock portfolio through diversification.

Define the term "risk" and explain how it is related to the expected return.

What is the typical relationship between the standard deviation of an individual common stock and the standard deviation of a diversified portfolio of common stocks?

Which of the following companies might you expect to be exposed to less macro risk?

Which statement is correct concerning macro risk exposure?

In a year in which common stocks offered an average return of 18 percent,Treasury bonds offered 10 percent and Treasury bills offered 7 percent,the risk premium for common stocks was:

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, IPOs, and Seasoned Offerings

Debt and Payout Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters