Question 1

Which of these is the dollar return characterized as a percentage of money invested?

Accepted Answer

A)  Average return 
B)  Dollar return 
C)  Market return 
D)  Percentage return 
A)  Average return 
B)  Dollar return 
C)  Market return 
D)  Percentage return

Question 2

Year-to-date,Company O had earned a −2.10 percent return.During the same time period,Company V earned 8.00 percent and Company M earned 6.25 percent.If you have a portfolio made up of 40 percent Company O,30 percent Company V,and 30 percent Company M,what is your portfolio return?

Accepted Answer

A)  3.435 percent 
B)  5.115 percent 
C)  12.15 percent 
D)  16.35 percent 
A)  3.435 percent 
B)  5.115 percent 
C)  12.15 percent 
D)  16.35 percent

Question 3

Which of the following is correct?

Accepted Answer

A)  Over a long time frame, stocks have performed better than long-term Treasury bonds. 
B)  Average stock returns are not an indication of what an investor may earn in any one year. 
C)  In some years, long-term Treasury bonds performed better than stocks. 
D)  All of the statements are correct. 
A)  Over a long time frame, stocks have performed better than long-term Treasury bonds. 
B)  Average stock returns are not an indication of what an investor may earn in any one year. 
C)  In some years, long-term Treasury bonds performed better than stocks. 
D)  All of the statements are correct.

Question 4

Consider the characteristics of the following three stocks:   The correlation between Thumb Devices and Air Comfort is −0.12.The correlation between Thumb Devices and Sport Garb is 0.89.The correlation between Air Comfort and Sport Garb is −0.85.If you can pick only two stocks for your portfolio,which would you pick? Why?

Accepted Answer

A)  Combine Thumb Devices and Sport Garb because they have a high correlation. 
B)  Combine Thumb Devices and Air Comfort because of high standard deviations. 
C)  Combine Air Comfort and Sport Garb due to negative correlation. 
D)  Combine Thumb Devices and Sport Garb because Thumb Devices has the highest return and Sport Garb has the lowest standard deviation. 
A)  Combine Thumb Devices and Sport Garb because they have a high correlation. 
B)  Combine Thumb Devices and Air Comfort because of high standard deviations. 
C)  Combine Air Comfort and Sport Garb due to negative correlation. 
D)  Combine Thumb Devices and Sport Garb because Thumb Devices has the highest return and Sport Garb has the lowest standard deviation.

Question 5

The past three monthly returns for Kohl's are 2.25 percent,−1.54 percent,and 1.35 percent.What is the average monthly return?

Accepted Answer

A)  0.69 percent 
B)  1.71 percent 
C)  2.06 percent 
D)  5.14 percent 
A)  0.69 percent 
B)  1.71 percent 
C)  2.06 percent 
D)  5.14 percent

Question 6

Consider the following correlations:   Given this data,which of the following is most preferable if an investor can only select one pair of companies?

Accepted Answer

A)  Apple and IBM 
B)  Disney and IBM 
C)  Disney and Apple 
D)  It does not matter which two are selected-there is no preference order. 
A)  Apple and IBM 
B)  Disney and IBM 
C)  Disney and Apple 
D)  It does not matter which two are selected-there is no preference order.

Question 7

The optimal portfolio for you will be:

Accepted Answer

A)  the one that offers the lowest correlation. 
B)  the one that offers the highest returns. 
C)  the one that reflects the amount of risk that you are willing to take. 
D)  the one that offers the most diversification. 
A)  the one that offers the lowest correlation. 
B)  the one that offers the highest returns. 
C)  the one that reflects the amount of risk that you are willing to take. 
D)  the one that offers the most diversification.

Question 8

Consider the following annual returns of Estee Lauder and Lowe's Companies:   Compute each stock's average return,standard deviation,and coefficient of variation.

Accepted Answer

A)  Estee Lauder: 9.02 percent; 17.99 percent; 2.00 and Lowe's Companies: 10.66 percent; 18.99 percent; 1.78 
B)  Estee Lauder: 9.02 percent; 30.69 percent; 3.4 and Lowe's Companies: 10.66 percent; 18.99 percent; 1.78 
C)  Estee Lauder: 9.02 percent; 30.69 percent; 3.4 and Lowe's Companies: 10.66 percent; 25.46 percent; 2.39 
D)  Estee Lauder: 10.7 percent; 17.79 percent; 1.66 and Lowe's Companies: 12.64 percent; 18.99 percent; 1.50 
A)  Estee Lauder: 9.02 percent; 17.99 percent; 2.00 and Lowe's Companies: 10.66 percent; 18.99 percent; 1.78 
B)  Estee Lauder: 9.02 percent; 30.69 percent; 3.4 and Lowe's Companies: 10.66 percent; 18.99 percent; 1.78 
C)  Estee Lauder: 9.02 percent; 30.69 percent; 3.4 and Lowe's Companies: 10.66 percent; 25.46 percent; 2.39 
D)  Estee Lauder: 10.7 percent; 17.79 percent; 1.66 and Lowe's Companies: 12.64 percent; 18.99 percent; 1.50

Question 9

Which of the following are investor diversification problems?

Accepted Answer

A)  Many employees hold mostly their employer's stocks as investments. 
B)  Many households hold relatively few individual stocks-the median is three. 
C)  Investors seem to prefer local firms thereby limiting diversification opportunities. 
D)  All of the options are investor diversification problems. 
A)  Many employees hold mostly their employer's stocks as investments. 
B)  Many households hold relatively few individual stocks-the median is three. 
C)  Investors seem to prefer local firms thereby limiting diversification opportunities. 
D)  All of the options are investor diversification problems.

Question 10

Year-to-date,Oracle had earned a 15.0 percent return.During the same time period,Valero Energy earned -12.96 percent and McDonald's earned 1.80 percent.If you have a portfolio made up of 50 percent Oracle,10 percent Valero Energy,and 40 percent McDonald's,what is your portfolio return?

Accepted Answer

A)  6.14 percent 
B)  4.86 percent 
C)  5.86 percent 
D)  6.92 percent 
A)  6.14 percent 
B)  4.86 percent 
C)  5.86 percent 
D)  6.92 percent

Question 11

Which of these is the portion of total risk that is attributable to overall economic factors?

Accepted Answer

A)  Firm specific risk 
B)  Market risk 
C)  Modern portfolio risk 
D)  Total risk 
A)  Firm specific risk 
B)  Market risk 
C)  Modern portfolio risk 
D)  Total risk

Question 12

Noble stock was $60.00 per share at the end of last year.Since then,it paid a $2.00 per share dividend last year.The stock price is currently $58.If you owned 400 shares of Noble,what was your percent return?

Accepted Answer

A)  −3.33 percent 
B)  0 percent 
C)  3.33 percent 
D)  3.45 percent 
A)  −3.33 percent 
B)  0 percent 
C)  3.33 percent 
D)  3.45 percent

Question 13

Which of the following is defined as the volatility of an investment,which includes firm specific risk as well as market risk?

Accepted Answer

A)  Diversifiable risk 
B)  Market risk 
C)  Standard deviation 
D)  Total risk 
A)  Diversifiable risk 
B)  Market risk 
C)  Standard deviation 
D)  Total risk

Question 14

An investor owns $2,000 of Adobe Systems stock,$4,000 of Dow Chemical,and $6,000 of Office Depot.What are the portfolio weights of each stock?

Accepted Answer

A)  Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333 
B)  Adobe System = 0.1667, Dow Chemical = 0.3333, Office Depot = 0.5 
C)  Adobe System = 0.3333, Dow Chemical = 0.1667, Office Depot = 0.5 
D)  Adobe System = 0.2, Dow Chemical = 0.4, Office Depot = 0.6 
A)  Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333 
B)  Adobe System = 0.1667, Dow Chemical = 0.3333, Office Depot = 0.5 
C)  Adobe System = 0.3333, Dow Chemical = 0.1667, Office Depot = 0.5 
D)  Adobe System = 0.2, Dow Chemical = 0.4, Office Depot = 0.6

Question 15

Compute the standard deviation of Kohl's monthly returns.The past five monthly returns for Kohl's are 5.55 percent,8.62 percent,−4.44 percent,−1.52 percent,and 9.75 percent.

Accepted Answer

A)  4.92 percent 
B)  5.07 percent 
C)  6.28 percent 
D)  6.12 percent 
A)  4.92 percent 
B)  5.07 percent 
C)  6.28 percent 
D)  6.12 percent

Question 16

Which statement is true?

Accepted Answer

A)  The larger the standard deviation, the lower the total risk. 
B)  The larger the standard deviation, the higher the total risk. 
C)  The larger the standard deviation, the more portfolio risk. 
D)  The standard deviation is not an indication of total risk. 
A)  The larger the standard deviation, the lower the total risk. 
B)  The larger the standard deviation, the higher the total risk. 
C)  The larger the standard deviation, the more portfolio risk. 
D)  The standard deviation is not an indication of total risk.

Question 17

If you own 100 shares of Air Line Inc.at $42.50,250 shares of BuyRite at $53.25,and 350 shares of MotorCity at $7.75,what are the portfolio weights of each stock?

Accepted Answer

A)  Air Line = 0.3333, BuyRite = 0.3333, MotorCity = 0.3333 
B)  Air Line = 0.10, BuyRite = 0.25, MotorCity = 0.35 
C)  Air Line = 0.2096, BuyRite = 0.6566, MotorCity = 0.1338 
D)  Air Line = 0.1429, BuyRite = 0.3571, MotorCity = 0.5000 
A)  Air Line = 0.3333, BuyRite = 0.3333, MotorCity = 0.3333 
B)  Air Line = 0.10, BuyRite = 0.25, MotorCity = 0.35 
C)  Air Line = 0.2096, BuyRite = 0.6566, MotorCity = 0.1338 
D)  Air Line = 0.1429, BuyRite = 0.3571, MotorCity = 0.5000

Question 18

If you invested $1,000 in Disney and $5,000 in Oracle and the two companies returned 15 percent and 18 percent respectively,what was your portfolio's return?

Accepted Answer

A)  15.5 percent 
B)  17.1 percent 
C)  16.2 percent 
D)  17.5 percent 
A)  15.5 percent 
B)  17.1 percent 
C)  16.2 percent 
D)  17.5 percent

Question 19

Sharif's portfolio generated returns of 12 percent,15 percent,−15 percent,19 percent,and −12 percent over five years.What was his average return over this period?

Accepted Answer

A)  19 percent 
B)  3.8 percent 
C)  17 percent 
D)  2.1 percent 
A)  19 percent 
B)  3.8 percent 
C)  17 percent 
D)  2.1 percent

Question 20

Sharif's portfolio generated returns of 10 percent,9 percent,−2 percent,and 6 percent over four years.What was his average return over this period?

Accepted Answer

A)  5.75 percent 
B)  6.75 percent 
C)  23 percent 
D)  27 percent 
A)  5.75 percent 
B)  6.75 percent 
C)  23 percent 
D)  27 percent

Which of these is the dollar return characterized as a percentage of money invested?

Year-to-date,Company O had earned a −2.10 percent return.During the same time period,Company V earned 8.00 percent and Company M earned 6.25 percent.If you have a portfolio made up of 40 percent Company O,30 percent Company V,and 30 percent Company M,what is your portfolio return?

Which of the following is correct?

The past three monthly returns for Kohl's are 2.25 percent,−1.54 percent,and 1.35 percent.What is the average monthly return?

Consider the following correlations: Given this data,which of the following is most preferable if an investor can only select one pair of companies?

The optimal portfolio for you will be:

Consider the following annual returns of Estee Lauder and Lowe's Companies: Compute each stock's average return,standard deviation,and coefficient of variation.

Which of the following are investor diversification problems?

Year-to-date,Oracle had earned a 15.0 percent return.During the same time period,Valero Energy earned -12.96 percent and McDonald's earned 1.80 percent.If you have a portfolio made up of 50 percent Oracle,10 percent Valero Energy,and 40 percent McDonald's,what is your portfolio return?

Which of these is the portion of total risk that is attributable to overall economic factors?

Noble stock was $60.00 per share at the end of last year.Since then,it paid a $2.00 per share dividend last year.The stock price is currently $58.If you owned 400 shares of Noble,what was your percent return?

Which of the following is defined as the volatility of an investment,which includes firm specific risk as well as market risk?

An investor owns $2,000 of Adobe Systems stock,$4,000 of Dow Chemical,and $6,000 of Office Depot.What are the portfolio weights of each stock?

Compute the standard deviation of Kohl's monthly returns.The past five monthly returns for Kohl's are 5.55 percent,8.62 percent,−4.44 percent,−1.52 percent,and 9.75 percent.

Which statement is true?

If you own 100 shares of Air Line Inc.at $42.50,250 shares of BuyRite at $53.25,and 350 shares of MotorCity at $7.75,what are the portfolio weights of each stock?

If you invested $1,000 in Disney and $5,000 in Oracle and the two companies returned 15 percent and 18 percent respectively,what was your portfolio's return?

Sharif's portfolio generated returns of 12 percent,15 percent,−15 percent,19 percent,and −12 percent over five years.What was his average return over this period?

Sharif's portfolio generated returns of 10 percent,9 percent,−2 percent,and 6 percent over four years.What was his average return over this period?

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

Estimating 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

Filters

Exam 9: Characterizing Risk and Return

Which of these is the dollar return characterized as a percentage of money invested?

Year-to-date,Company O had earned a −2.10 percent return.During the same time period,Company V earned 8.00 percent and Company M earned 6.25 percent.If you have a portfolio made up of 40 percent Company O,30 percent Company V,and 30 percent Company M,what is your portfolio return?

Which of the following is correct?

The past three monthly returns for Kohl's are 2.25 percent,−1.54 percent,and 1.35 percent.What is the average monthly return?

Consider the following correlations: Given this data,which of the following is most preferable if an investor can only select one pair of companies?

The optimal portfolio for you will be:

Consider the following annual returns of Estee Lauder and Lowe's Companies: Compute each stock's average return,standard deviation,and coefficient of variation.

Which of the following are investor diversification problems?

Year-to-date,Oracle had earned a 15.0 percent return.During the same time period,Valero Energy earned -12.96 percent and McDonald's earned 1.80 percent.If you have a portfolio made up of 50 percent Oracle,10 percent Valero Energy,and 40 percent McDonald's,what is your portfolio return?

Which of these is the portion of total risk that is attributable to overall economic factors?

Noble stock was $60.00 per share at the end of last year.Since then,it paid a $2.00 per share dividend last year.The stock price is currently $58.If you owned 400 shares of Noble,what was your percent return?

Which of the following is defined as the volatility of an investment,which includes firm specific risk as well as market risk?

An investor owns $2,000 of Adobe Systems stock,$4,000 of Dow Chemical,and $6,000 of Office Depot.What are the portfolio weights of each stock?

Compute the standard deviation of Kohl's monthly returns.The past five monthly returns for Kohl's are 5.55 percent,8.62 percent,−4.44 percent,−1.52 percent,and 9.75 percent.

Which statement is true?

If you own 100 shares of Air Line Inc.at $42.50,250 shares of BuyRite at $53.25,and 350 shares of MotorCity at $7.75,what are the portfolio weights of each stock?

If you invested $1,000 in Disney and $5,000 in Oracle and the two companies returned 15 percent and 18 percent respectively,what was your portfolio's return?

Sharif's portfolio generated returns of 12 percent,15 percent,−15 percent,19 percent,and −12 percent over five years.What was his average return over this period?

Sharif's portfolio generated returns of 10 percent,9 percent,−2 percent,and 6 percent over four years.What was his average return over this period?

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

Estimating 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

Filters