Question 1

The Nasdaq stock market bubble peaked at 10,816 in 2000. Two and a half years later it had fallen to 4,000. What was the percentage decline?

Accepted Answer

A)  -63.02% 
B)  -69.47% 
C)  -57.13% 
D)  -49.18% 
A)  -63.02% 
B)  -69.47% 
C)  -57.13% 
D)  -49.18%

Question 2

Special rights given to some employees to buy a specific number of shares of the company stock at a fixed price during a specific period of time.

Accepted Answer

A)  executive stock options 
B)  privately held information 
C)  restricted stock 
D)  stock market bubble 
A)  executive stock options 
B)  privately held information 
C)  restricted stock 
D)  stock market bubble

Question 3

US Bancorp holds a press conference to announce a positive news event that was unexpected to the market. As soon as the announcement is made, the stock price increases $8 per share but then over the next hour the price falls resulting in a net increase of only $4. Given this information which of the following statements is correct?

Accepted Answer

A)  This is an example of a market overreaction. 
B)  This is an example of a market underreaction. 
C)  This is an example of a semi-strong efficient market. 
D)  None of these statements are correct. 
A)  This is an example of a market overreaction. 
B)  This is an example of a market underreaction. 
C)  This is an example of a semi-strong efficient market. 
D)  None of these statements are correct.

Question 4

Company Risk Premium A company has a beta of 4.5. If the market return is expected to be 14 percent and the risk-free rate is 7 percent, what is the company's risk premium?

Accepted Answer

A)  7.0% 
B)  25.5% 
C)  31.5% 
D)  38.5% 
A)  7.0% 
B)  25.5% 
C)  31.5% 
D)  38.5%

Question 5

The asset pricing theory based on a beta, a measure of market risk.

Accepted Answer

A)  Behavioral Asset Pricing Model 
B)  Capital Asset Pricing Model 
C)  Efficient Markets Asset Pricing Model 
D)  Efficient Market Hypothesis 
A)  Behavioral Asset Pricing Model 
B)  Capital Asset Pricing Model 
C)  Efficient Markets Asset Pricing Model 
D)  Efficient Market Hypothesis

Question 6

Which of the following is correct?

Accepted Answer

A)  Hedge funds often sell stock they don't even own. 
B)  Hedge funds maintain secrecy about their holdings, trading and strategies. 
C)  Hedge funds are limited to sophisticated investors. 
D)  All of these statements are correct. 
A)  Hedge funds often sell stock they don't even own. 
B)  Hedge funds maintain secrecy about their holdings, trading and strategies. 
C)  Hedge funds are limited to sophisticated investors. 
D)  All of these statements are correct.

Question 7

This is data that includes past stock prices and volume, financial statements, corporate news, analyst opinions, etc.

Accepted Answer

A)  audited financial statements 
B)  generally accepted accounting principles 
C)  privately held information 
D)  public information 
A)  audited financial statements 
B)  generally accepted accounting principles 
C)  privately held information 
D)  public information

Question 8

Which of the following is a true statement?

Accepted Answer

A)  The risk and return that a firm experienced in the past is also the risk level for its future. 
B)  Firms can quite possibly change their stocks' risk level by substantially changing their business. 
C)  If a firm takes on riskier new projects over time, the firm itself will become less risky. 
D)  If a firm takes on less risky new projects over time, the firm itself will become more risky. 
A)  The risk and return that a firm experienced in the past is also the risk level for its future. 
B)  Firms can quite possibly change their stocks' risk level by substantially changing their business. 
C)  If a firm takes on riskier new projects over time, the firm itself will become less risky. 
D)  If a firm takes on less risky new projects over time, the firm itself will become more risky.

Question 9

The constant growth model requires what information for computing shareholders' required return?

Accepted Answer

1. current stock price
2. an e

Question 10

Which of these is the measurement of risk for a collection of stocks for an investor?

Accepted Answer

A)  beta 
B)  efficient market 
C)  expected return 
D)  portfolio beta 
A)  beta 
B)  efficient market 
C)  expected return 
D)  portfolio beta

Question 11

The stocks of small companies that are priced below $1 per share.

Accepted Answer

A)  bargain stocks 
B)  hedge fund stocks 
C)  penny stocks 
D)  stock market bubble stocks 
A)  bargain stocks 
B)  hedge fund stocks 
C)  penny stocks 
D)  stock market bubble stocks

Question 12

Portfolio Beta and Required Return You hold the positions in the table below. What is the beta of your portfolio? If you expect the market to earn 14 percent and the risk-free rate is 5 percent, what is the required return of the portfolio?

Accepted Answer

A)  20.21% 
B)  22.66% 
C)  28.66% 
D)  32.48% 
A)  20.21% 
B)  22.66% 
C)  28.66% 
D)  32.48%

Question 13

Portfolio Beta You hold the positions in the table below. What is the beta of your portfolio?

Accepted Answer

A)  1.4 
B)  2.08 
C)  2.13 
D)  5.6 
A)  1.4 
B)  2.08 
C)  2.13 
D)  5.6

Question 14

Universal Forest's current stock price is $154.00 and it is likely to pay a $5.23 dividend next year. Since analysts estimate Universal Forest will have a 13.0% growth rate, what is its required return?

Accepted Answer

A)  16.40% 
B)  15.28% 
C)  13.62% 
D)  14.71% 
A)  16.40% 
B)  15.28% 
C)  13.62% 
D)  14.71%

Question 15

You hold the positions in the table below. What is the beta of your portfolio? If you expect the market to earn 10 percent and the risk-free rate is 4 percent, what is the required return of the portfolio?

Accepted Answer

A)  12.37% 
B)  9.73% 
C)  10.17% 
D)  11.68% 
A)  12.37% 
B)  9.73% 
C)  10.17% 
D)  11.68%

Question 16

A measure of the sensitivity of a stock or portfolio to market risk.

Accepted Answer

A)  behavioral finance 
B)  beta 
C)  efficient market 
D)  hedge 
A)  behavioral finance 
B)  beta 
C)  efficient market 
D)  hedge

Question 17

Which of the following statements is incorrect?

Accepted Answer

A)  The capital market line shows the relationship between return and risk as measured by the standard deviation. 
B)  The Efficient Market Hypothesis states that security prices fully reflect all available information. 
C)  The security market line shows the relationship between return and risk as measured by beta. 
D)  None of these statements are correct. 
A)  The capital market line shows the relationship between return and risk as measured by the standard deviation. 
B)  The Efficient Market Hypothesis states that security prices fully reflect all available information. 
C)  The security market line shows the relationship between return and risk as measured by beta. 
D)  None of these statements are correct.

Question 18

Which of the following is most correct?

Accepted Answer

A)  In an efficient market, investors will buy overvalued stock which will drive its price down. 
B)  In an efficient market, investors will sell undervalued stock which will drive its price down. 
C)  In an efficient market, investors will sell overvalued stock which will drive its price down. 
D)  None of these statements is correct. 
A)  In an efficient market, investors will buy overvalued stock which will drive its price down. 
B)  In an efficient market, investors will sell undervalued stock which will drive its price down. 
C)  In an efficient market, investors will sell overvalued stock which will drive its price down. 
D)  None of these statements is correct.

Question 19

Risk Premium The annual return on the S&P 500 Index was 12.4 percent. The annual T-bill yield during the same period was 5.7 percent. What was the market risk premium during that year?

Accepted Answer

A)  5.7% 
B)  6.7% 
C)  12.4% 
D)  18.1% 
A)  5.7% 
B)  6.7% 
C)  12.4% 
D)  18.1%

Question 20

Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns:

Accepted Answer

A)  6.8% 
B)  12.8% 
C)  16.0% 
D)  22.7% 
A)  6.8% 
B)  12.8% 
C)  16.0% 
D)  22.7%

The Nasdaq stock market bubble peaked at 10,816 in 2000. Two and a half years later it had fallen to 4,000. What was the percentage decline?

Special rights given to some employees to buy a specific number of shares of the company stock at a fixed price during a specific period of time.

Company Risk Premium A company has a beta of 4.5. If the market return is expected to be 14 percent and the risk-free rate is 7 percent, what is the company's risk premium?

The asset pricing theory based on a beta, a measure of market risk.

Which of the following is correct?

This is data that includes past stock prices and volume, financial statements, corporate news, analyst opinions, etc.

Which of the following is a true statement?

The constant growth model requires what information for computing shareholders' required return?

Which of these is the measurement of risk for a collection of stocks for an investor?

The stocks of small companies that are priced below $1 per share.

Portfolio Beta and Required Return You hold the positions in the table below. What is the beta of your portfolio? If you expect the market to earn 14 percent and the risk-free rate is 5 percent, what is the required return of the portfolio?

Portfolio Beta You hold the positions in the table below. What is the beta of your portfolio?

Universal Forest's current stock price is $154.00 and it is likely to pay a $5.23 dividend next year. Since analysts estimate Universal Forest will have a 13.0% growth rate, what is its required return?

You hold the positions in the table below. What is the beta of your portfolio? If you expect the market to earn 10 percent and the risk-free rate is 4 percent, what is the required return of the portfolio?

A measure of the sensitivity of a stock or portfolio to market risk.

Which of the following statements is incorrect?

Which of the following is most correct?

Risk Premium The annual return on the S&P 500 Index was 12.4 percent. The annual T-bill yield during the same period was 5.7 percent. What was the market risk premium during that year?

Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns:

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 10: Estimating Risk and Return

The Nasdaq stock market bubble peaked at 10,816 in 2000. Two and a half years later it had fallen to 4,000. What was the percentage decline?

Special rights given to some employees to buy a specific number of shares of the company stock at a fixed price during a specific period of time.

Company Risk Premium A company has a beta of 4.5. If the market return is expected to be 14 percent and the risk-free rate is 7 percent, what is the company's risk premium?

The asset pricing theory based on a beta, a measure of market risk.

Which of the following is correct?

This is data that includes past stock prices and volume, financial statements, corporate news, analyst opinions, etc.

Which of the following is a true statement?

The constant growth model requires what information for computing shareholders' required return?

Which of these is the measurement of risk for a collection of stocks for an investor?

The stocks of small companies that are priced below $1 per share.

Portfolio Beta and Required Return You hold the positions in the table below. What is the beta of your portfolio? If you expect the market to earn 14 percent and the risk-free rate is 5 percent, what is the required return of the portfolio?

Portfolio Beta You hold the positions in the table below. What is the beta of your portfolio?

Universal Forest's current stock price is $154.00 and it is likely to pay a $5.23 dividend next year. Since analysts estimate Universal Forest will have a 13.0% growth rate, what is its required return?

You hold the positions in the table below. What is the beta of your portfolio? If you expect the market to earn 10 percent and the risk-free rate is 4 percent, what is the required return of the portfolio?

A measure of the sensitivity of a stock or portfolio to market risk.

Which of the following statements is incorrect?

Which of the following is most correct?

Risk Premium The annual return on the S&P 500 Index was 12.4 percent. The annual T-bill yield during the same period was 5.7 percent. What was the market risk premium during that year?

Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns:

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters