Question 1

An ordinary annuity has cash flows that occur at the ________ of each time period and are ________ in amount.

Accepted Answer

A)  beginning; constant 
B)  beginning; variable 
C)  end; constant 
D)  end; variable 
A)  beginning; constant 
B)  beginning; variable 
C)  end; constant 
D)  end; variable C

Question 2

One reason that the holding period return should not be used to compare long-term investments is that it does not consider the time value of money.

Accepted Answer

A) True 
 B)False  True

Question 3

Interest rates change as the result of changes in the supply and demand for money.

Accepted Answer

A) True 
 B)False  True

Question 4

To compute the present value of $1,000 discounted at the rate of 5% per year, to be received at the end of 3 years, you should enter the following variables into a financial calculator

Accepted Answer

A)  N=3, i=5, PV=1000 
B)  N=3, i=5, FV=1000 
C)  N=3, i=5, PMT=1000 
D)  N=3, i=.05, PV=1000 
A)  N=3, i=5, PV=1000 
B)  N=3, i=5, FV=1000 
C)  N=3, i=5, PMT=1000 
D)  N=3, i=.05, PV=1000

Question 5

Joshua bought a stock for $17 a share two years ago.The stock does not pay any dividends.Today Izzie sold the stock for $18.50 a share.What was his internal rate of return on this investment?

Accepted Answer

A)  4.3% 
B)  6.2% 
C)  7.1% 
D)  8.8% 
A)  4.3% 
B)  6.2% 
C)  7.1% 
D)  8.8%

Question 6

The following investment cash flows have been entered into cells B5 through B9 of an EXCEL spreadsheet.B5 $(5,200 ), B6 $2,100, B7 $1,300, B8 $1,800, B9 $1,200, where $5,200 is the cost of the investment and the following amounts are cash flows at the end of years one through four.The correct function for computing the yield on this investment is...?

Accepted Answer

A)  =irr(B6:B9)+B5 
B)  =irr(B6:B9) 
C)  =rate(4,0,-5200, 1200) 
D)  =ytm(B5, B6:B9) 
A)  =irr(B6:B9)+B5 
B)  =irr(B6:B9) 
C)  =rate(4,0,-5200, 1200) 
D)  =ytm(B5, B6:B9)

Question 7

Christopher purchased 200 shares of ABC stock at $21.25 per share.After nine months, he sold all of his shares at a price of $19.88 a share.Jake received a total of $0.55 per share in dividends during the time he owned the shares.Jake's holding period return is

Accepted Answer

A)  -6.4%. 
B)  -3.9%. 
C)  2.6%. 
D)  9.7%. 
A)  -6.4%. 
B)  -3.9%. 
C)  2.6%. 
D)  9.7%.

Question 8

If the risk-free rate of return is less than the inflation rate, the real rate of return is negative.

Accepted Answer

A) True 
 B)False

Question 9

To compute the present value of $1,000 discounted at the rate of 5% per year, to be received at the end of 3 years, you should use the following EXCEL command.

Accepted Answer

A)  DISC 
B)  TVM 
C)  PV 
D)  RATE 
A)  DISC 
B)  TVM 
C)  PV 
D)  RATE

Question 10

The standard deviation is computed by dividing the sum of the squared deviations by the number of observations.

Accepted Answer

A) True 
 B)False

Question 11

Inflation tends to have a favorable impact on

Accepted Answer

A)  real estate. 
B)  common stock. 
C)  preferred stock. 
D)  bonds. 
A)  real estate. 
B)  common stock. 
C)  preferred stock. 
D)  bonds.

Question 12

The required rate of return on the Daisy Corporation's common stock is 11%, the current real rate of return in the market is 1%, and the market's risk-free rate of return is 4%.In this case, the risk premium associated with Daisy's stock is

Accepted Answer

A)  5%. 
B)  6%. 
C)  7%. 
D)  8%. 
A)  5%. 
B)  6%. 
C)  7%. 
D)  8%.

Question 13

The required return on Beta stock is 14%.The risk-free rate of return is 4% and the real rate of return is 2%.How much are investors requiring as compensation for risk?

Accepted Answer

A)  8% 
B)  10% 
C)  12% 
D)  14% 
A)  8% 
B)  10% 
C)  12% 
D)  14%

Question 14

The holding period return is an excellent method for comparing a short-term investment to a long-term investment.

Accepted Answer

A) True 
 B)False

Question 15

A capital loss is computed by

Accepted Answer

A)  subtracting the original cost of an investment from the proceeds received from the sale of that investment minus any income from the investment. 
B)  subtracting the original cost of an investment from the proceeds received from the sale of that investment plus any income from the investment. 
C)  subtracting the proceeds received from the sale of an investment from the original cost of the investment. 
D)  subtracting the original cost of an investment from the proceeds received from the sale of that investment. 
A)  subtracting the original cost of an investment from the proceeds received from the sale of that investment minus any income from the investment. 
B)  subtracting the original cost of an investment from the proceeds received from the sale of that investment plus any income from the investment. 
C)  subtracting the proceeds received from the sale of an investment from the original cost of the investment. 
D)  subtracting the original cost of an investment from the proceeds received from the sale of that investment.

Question 16

Which of the following should be considered when deciding among alternative investments?
I.time value of money
II.risks associated with each investment
III.risk free rate of return
IV.personal risk tolerance level

Accepted Answer

A)  I and II only 
B)  III and IV only 
C)  I, II and IV only 
D)  I, II, III and IV 
A)  I and II only 
B)  III and IV only 
C)  I, II and IV only 
D)  I, II, III and IV

Question 17

Christopher invests $400 today at a 4% rate of return which is compounded annually.What is the future value of this investment after four years?

Accepted Answer

A)  $342 
B)  $416 
C)  $464 
D)  $468 
A)  $342 
B)  $416 
C)  $464 
D)  $468

Question 18

An ordinary annuity is defined as an annuity for which the cash flows occur at the beginning of each year or payment period.

Accepted Answer

A) True 
 B)False

Question 19

The holding period return should not be used when analyzing investments with unequal holding periods.

Accepted Answer

A) True 
 B)False

Question 20

Stocks in which of the following industries may be impacted by government actions?

Accepted Answer

A)  Health Care 
B)  Housing 
C)  Defense 
D)  All of the above 
A)  Health Care 
B)  Housing 
C)  Defense 
D)  All of the above

An ordinary annuity has cash flows that occur at the of each time period and are in amount.

One reason that the holding period return should not be used to compare long-term investments is that it does not consider the time value of money.

Interest rates change as the result of changes in the supply and demand for money.

To compute the present value of $1,000 discounted at the rate of 5% per year, to be received at the end of 3 years, you should enter the following variables into a financial calculator

Joshua bought a stock for $17 a share two years ago.The stock does not pay any dividends.Today Izzie sold the stock for $18.50 a share.What was his internal rate of return on this investment?

Christopher purchased 200 shares of ABC stock at $21.25 per share.After nine months, he sold all of his shares at a price of $19.88 a share.Jake received a total of $0.55 per share in dividends during the time he owned the shares.Jake's holding period return is

If the risk-free rate of return is less than the inflation rate, the real rate of return is negative.

To compute the present value of $1,000 discounted at the rate of 5% per year, to be received at the end of 3 years, you should use the following EXCEL command.

The standard deviation is computed by dividing the sum of the squared deviations by the number of observations.

Inflation tends to have a favorable impact on

The required rate of return on the Daisy Corporation's common stock is 11%, the current real rate of return in the market is 1%, and the market's risk-free rate of return is 4%.In this case, the risk premium associated with Daisy's stock is

The required return on Beta stock is 14%.The risk-free rate of return is 4% and the real rate of return is 2%.How much are investors requiring as compensation for risk?

The holding period return is an excellent method for comparing a short-term investment to a long-term investment.

A capital loss is computed by

Which of the following should be considered when deciding among alternative investments? I.time value of money II.risks associated with each investment III.risk free rate of return IV.personal risk tolerance level

Christopher invests $400 today at a 4% rate of return which is compounded annually.What is the future value of this investment after four years?

An ordinary annuity is defined as an annuity for which the cash flows occur at the beginning of each year or payment period.

The holding period return should not be used when analyzing investments with unequal holding periods.

Stocks in which of the following industries may be impacted by government actions?

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency, Behavioral Finance, and Technical Analysis

Fixed-Income Securities

Bond Valuation

Mutual Funds: Professionally Managed Portfolios

Managing Your Own Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters

Exam 4: Return and Risk

An ordinary annuity has cash flows that occur at the ________ of each time period and are ________ in amount.

One reason that the holding period return should not be used to compare long-term investments is that it does not consider the time value of money.

Interest rates change as the result of changes in the supply and demand for money.

To compute the present value of $1,000 discounted at the rate of 5% per year, to be received at the end of 3 years, you should enter the following variables into a financial calculator

Joshua bought a stock for $17 a share two years ago.The stock does not pay any dividends.Today Izzie sold the stock for $18.50 a share.What was his internal rate of return on this investment?

Christopher purchased 200 shares of ABC stock at $21.25 per share.After nine months, he sold all of his shares at a price of $19.88 a share.Jake received a total of $0.55 per share in dividends during the time he owned the shares.Jake's holding period return is

If the risk-free rate of return is less than the inflation rate, the real rate of return is negative.

To compute the present value of $1,000 discounted at the rate of 5% per year, to be received at the end of 3 years, you should use the following EXCEL command.

The standard deviation is computed by dividing the sum of the squared deviations by the number of observations.

Inflation tends to have a favorable impact on

The required rate of return on the Daisy Corporation's common stock is 11%, the current real rate of return in the market is 1%, and the market's risk-free rate of return is 4%.In this case, the risk premium associated with Daisy's stock is

The required return on Beta stock is 14%.The risk-free rate of return is 4% and the real rate of return is 2%.How much are investors requiring as compensation for risk?

The holding period return is an excellent method for comparing a short-term investment to a long-term investment.

A capital loss is computed by

Which of the following should be considered when deciding among alternative investments? I.time value of money II.risks associated with each investment III.risk free rate of return IV.personal risk tolerance level

Christopher invests $400 today at a 4% rate of return which is compounded annually.What is the future value of this investment after four years?

An ordinary annuity is defined as an annuity for which the cash flows occur at the beginning of each year or payment period.

The holding period return should not be used when analyzing investments with unequal holding periods.

Stocks in which of the following industries may be impacted by government actions?

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency, Behavioral Finance, and Technical Analysis

Fixed-Income Securities

Bond Valuation

Mutual Funds: Professionally Managed Portfolios

Managing Your Own Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters

An ordinary annuity has cash flows that occur at the of each time period and are in amount.