Question 1

The past five monthly returns for PG Company are 1.25 percent,−1.50 percent,4.25 percent,3.75 percent,and 1.98 percent.What is the average monthly return?

Accepted Answer

A)  1.946 percent 
B)  2.546 percent 
C)  9.73 percent 
D)  12.73 percent 
A)  1.946 percent 
B)  2.546 percent 
C)  9.73 percent 
D)  12.73 percent

Question 2

We commonly measure the risk-return relationship using which of the following?

Accepted Answer

A)  Coefficient of variation 
B)  Correlation coefficient 
C)  Standard deviation 
D)  Expected returns 
A)  Coefficient of variation 
B)  Correlation coefficient 
C)  Standard deviation 
D)  Expected returns

Question 3

Which of the following is correct?

Accepted Answer

A)  Investors can reduce the risk in their portfolio by investing in international stocks since they tend to have low correlation with our own stock market. 
B)  Combining both stocks and bonds will likely reduce risk in a portfolio because the two assets have low correlation. 
C)  Your optimal portfolio is an efficient portfolio with your desired risk level. 
D)  All of the statements are correct. 
A)  Investors can reduce the risk in their portfolio by investing in international stocks since they tend to have low correlation with our own stock market. 
B)  Combining both stocks and bonds will likely reduce risk in a portfolio because the two assets have low correlation. 
C)  Your optimal portfolio is an efficient portfolio with your desired risk level. 
D)  All of the statements are correct.

Question 4

The past five monthly returns for K and Company are 2.28 percent,2.64 percent,−1.05 percent,4.25 percent,and 9.25 percent.What is the average monthly return?

Accepted Answer

A)  1.45 percent 
B)  1.62 percent 
C)  3.47 percent 
D)  3.89 percent 
A)  1.45 percent 
B)  1.62 percent 
C)  3.47 percent 
D)  3.89 percent

Question 5

Year-to-date,Oracle had earned a 12.57 percent return.During the same time period,Valero Energy earned −9.32 percent and McDonald's earned 3.45 percent.If you have a portfolio made up of 60 percent Oracle,20 percent Valero Energy,and 20 percent McDonald's,what is your portfolio return?

Accepted Answer

A)  10.10 percent 
B)  8.45 percent 
C)  6.70 percent 
D)  6.37 percent 
A)  10.10 percent 
B)  8.45 percent 
C)  6.70 percent 
D)  6.37 percent

Question 6

Which of these is the term for portfolios with the highest return possible for each risk level?

Accepted Answer

A)  Efficient portfolios 
B)  Modern portfolios 
C)  Optimal portfolios 
D)  Total portfolios 
A)  Efficient portfolios 
B)  Modern portfolios 
C)  Optimal portfolios 
D)  Total portfolios

Question 7

Determine which one of these three portfolios dominates another.Name the dominated portfolio and the portfolio that dominates it.Portfolio Blue has an expected return of 14 percent and risk of 19 percent.The expected return and risk of portfolio Yellow are 15 percent and 18 percent,and for the Purple portfolio are 16 percent and 21 percent.

Accepted Answer

A)  Portfolio Blue dominates portfolio Yellow 
B)  Portfolio Yellow dominates portfolio Blue 
C)  Portfolio Purple dominates portfolio Blue 
D)  Portfolio Purple dominates portfolio Yellow 
A)  Portfolio Blue dominates portfolio Yellow 
B)  Portfolio Yellow dominates portfolio Blue 
C)  Portfolio Purple dominates portfolio Blue 
D)  Portfolio Purple dominates portfolio Yellow

Question 8

Interest rates,inflation and economic growth are economic factors that are examples of:

Accepted Answer

A)  firm-specific risks that can be diversified away. 
B)  market risk. 
C)  external factors that are neither firm specific risk nor market risk. 
D)  None of the statements are correct. 
A)  firm-specific risks that can be diversified away. 
B)  market risk. 
C)  external factors that are neither firm specific risk nor market risk. 
D)  None of the statements are correct.

Question 9

Rank the following three stocks by their risk-return relationship,best to worst.Night Ryder has an average return of 33 percent and standard deviation of 40 percent.The average return and standard deviation of WholeMart are 10 percent and 20 percent; and of Fruit Fly are 19 percent and 33 percent.

Accepted Answer

A)  Night Ryder, WholeMart, Fruit Fly 
B)  WholeMart, Fruit Fly, Night Ryder 
C)  Night Ryder, Fruit Fly, WholeMart 
D)  Fruit Fly, Whole Mart, Night Ryder 
A)  Night Ryder, WholeMart, Fruit Fly 
B)  WholeMart, Fruit Fly, Night Ryder 
C)  Night Ryder, Fruit Fly, WholeMart 
D)  Fruit Fly, Whole Mart, Night Ryder

Question 10

If you own 400 shares of Air Line Inc.at $44.50,500 shares of BuyRite at $52.90,and 100 shares of MotorCity at $9.25,what are the portfolio weights of each stock?

Accepted Answer

A)  Air Line = 0.3333, BuyRite = 0.3333, MotorCity = 0.3333 
B)  Air Line = 0.40, BuyRite = 0.50, MotorCity = 0.10 
C)  Air Line = 0.3940, BuyRite = 0.5855, MotorCity = 0.0205 
D)  Air Line = 0.4173, BuyRite = 0.4960, MotorCity = 0.0867 
A)  Air Line = 0.3333, BuyRite = 0.3333, MotorCity = 0.3333 
B)  Air Line = 0.40, BuyRite = 0.50, MotorCity = 0.10 
C)  Air Line = 0.3940, BuyRite = 0.5855, MotorCity = 0.0205 
D)  Air Line = 0.4173, BuyRite = 0.4960, MotorCity = 0.0867

Question 11

Which of the following is correct regarding the coefficient of variation?

Accepted Answer

A)  It measures the amount of standard deviation for each one percent of covariance. 
B)  It measures the amount of return achieved for each one percent of risk taken. 
C)  It measures the amount of risk taken for each one percent of return achieved. 
D)  None of the statements are correct. 
A)  It measures the amount of standard deviation for each one percent of covariance. 
B)  It measures the amount of return achieved for each one percent of risk taken. 
C)  It measures the amount of risk taken for each one percent of return achieved. 
D)  None of the statements are correct.

Question 12

An investor owns $8,000 of Adobe Systems stock,$5,000 of Dow Chemical,and $3,000 of Office Depot.What are the portfolio weights of each stock?

Accepted Answer

A)  Adobe: 0.5; Dow Chemical: 0.31; Office Depot: 0.19 
B)  Adobe: 0.5; Dow Chemical: 0.32; Office Depot: 0.18 
C)  Adobe: 0.5; Dow Chemical: 0.13; Office Depot: 0.27 
D)  Adobe: 0.5; Dow Chemical: 0.19; Office Depot: 0.31 
A)  Adobe: 0.5; Dow Chemical: 0.31; Office Depot: 0.19 
B)  Adobe: 0.5; Dow Chemical: 0.32; Office Depot: 0.18 
C)  Adobe: 0.5; Dow Chemical: 0.13; Office Depot: 0.27 
D)  Adobe: 0.5; Dow Chemical: 0.19; Office Depot: 0.31

Question 13

Jenna receives an investment newsletter that recommends that she invest in a stock that has doubled the return of the S&P 500 in the last two months.It also claims that this stock is a "safe bet" for the future.Which of the following statements is correct regarding this information?

Accepted Answer

A)  This investment newsletter is most likely correct because they most likely have some special knowledge about the stock. 
B)  The investment newsletter contains contrary information since the stock must be a high risk and therefore cannot also be a "safe bet." 
C)  It is common for individual stocks to double the return of the S&P 500 and still be a "safe bet." 
D)  None of the statements are correct. 
A)  This investment newsletter is most likely correct because they most likely have some special knowledge about the stock. 
B)  The investment newsletter contains contrary information since the stock must be a high risk and therefore cannot also be a "safe bet." 
C)  It is common for individual stocks to double the return of the S&P 500 and still be a "safe bet." 
D)  None of the statements are correct.

Question 14

You have $10,000 to invest.You want to purchase shares of Alaska Air at $50.00,Best Buy at $50.00,and Ford Motor at $10.00.How many shares of each company should you purchase so that your portfolio consists of 25 percent Alaska Air,40 percent Best Buy,and 35 percent Ford Motor? Report only whole stock shares.

Accepted Answer

A)  50 shares of Alaska Air, 80 shares of Best Buy, and 300 shares of Ford Motor 
B)  50 shares of Alaska Air, 80 shares of Best Buy, and 350 shares of Ford Motor 
C)  40 shares of Alaska Air, 90 shares of Best Buy, and 300 shares of Ford Motor 
D)  75 shares of Alaska Air, 40 shares of Best Buy, and 350 shares of Ford Motor 
A)  50 shares of Alaska Air, 80 shares of Best Buy, and 300 shares of Ford Motor 
B)  50 shares of Alaska Air, 80 shares of Best Buy, and 350 shares of Ford Motor 
C)  40 shares of Alaska Air, 90 shares of Best Buy, and 300 shares of Ford Motor 
D)  75 shares of Alaska Air, 40 shares of Best Buy, and 350 shares of Ford Motor

Question 15

Year to date,Company Y had earned a 10.8 percent return.During the same time period,Company R earned 12.20 percent and Company C earned −1.56 percent.If you have a portfolio made up of 45 percent Y,35 percent R,and 20 percent C,what is your portfolio return?

Accepted Answer

A)  7.15 percent 
B)  8.19 percent 
C)  8.82 percent 
D)  9.44 percent 
A)  7.15 percent 
B)  8.19 percent 
C)  8.82 percent 
D)  9.44 percent

Question 16

Which of the following describes what will occur as you randomly add stocks to your portfolio?

Accepted Answer

A)  The nondiversifiable risk will decrease. 
B)  Both the diversifiable and nondiversifiable risk will decrease. 
C)  The portfolio return will increase. 
D)  The diversifiable risk will decrease. 
A)  The nondiversifiable risk will decrease. 
B)  Both the diversifiable and nondiversifiable risk will decrease. 
C)  The portfolio return will increase. 
D)  The diversifiable risk will decrease.

Question 17

Which of these is a measure summarizing the overall past performance of an investment?

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 18

Rank the following three stocks by their level of total risk,highest to lowest.Rail Haul has an average return of 10 percent and standard deviation of 15 percent.The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

Accepted Answer

A)  Rail Haul, Poker-R-Us, Idol Staff 
B)  Idol Staff, Poker-R-Us, Rail Haul 
C)  Poker-R-Us, Idol Staff, Rail Haul 
D)  Idol Staff, Rail Haul, Poker-R-Us 
A)  Rail Haul, Poker-R-Us, Idol Staff 
B)  Idol Staff, Poker-R-Us, Rail Haul 
C)  Poker-R-Us, Idol Staff, Rail Haul 
D)  Idol Staff, Rail Haul, Poker-R-Us

Question 19

The standard deviation of the past five monthly returns for K and Company are 4.25 percent,4.13 percent,−2.05 percent,3.25 percent,and 7.75 percent.What is the standard deviation?

Accepted Answer

A)  1.40 percent 
B)  3.37 percent 
C)  3.53 percent 
D)  16.83 percent 
A)  1.40 percent 
B)  3.37 percent 
C)  3.53 percent 
D)  16.83 percent

Question 20

At the beginning of the month,you owned $15,500 of General Motors,$4,500 of Starbucks,and $9,000 of Nike.The monthly returns for General Motors,Starbucks,and Nike were 7.10 percent,−1.36 percent,and −0.54 percent.What is your portfolio return?

Accepted Answer

A)  −1.12 percent 
B)  1.17 percent 
C)  2.54 percent 
D)  3.42 percent 
A)  −1.12 percent 
B)  1.17 percent 
C)  2.54 percent 
D)  3.42 percent

The past five monthly returns for PG Company are 1.25 percent,−1.50 percent,4.25 percent,3.75 percent,and 1.98 percent.What is the average monthly return?

We commonly measure the risk-return relationship using which of the following?

Which of the following is correct?

The past five monthly returns for K and Company are 2.28 percent,2.64 percent,−1.05 percent,4.25 percent,and 9.25 percent.What is the average monthly return?

Year-to-date,Oracle had earned a 12.57 percent return.During the same time period,Valero Energy earned −9.32 percent and McDonald's earned 3.45 percent.If you have a portfolio made up of 60 percent Oracle,20 percent Valero Energy,and 20 percent McDonald's,what is your portfolio return?

Which of these is the term for portfolios with the highest return possible for each risk level?

Interest rates,inflation and economic growth are economic factors that are examples of:

Rank the following three stocks by their risk-return relationship,best to worst.Night Ryder has an average return of 33 percent and standard deviation of 40 percent.The average return and standard deviation of WholeMart are 10 percent and 20 percent; and of Fruit Fly are 19 percent and 33 percent.

If you own 400 shares of Air Line Inc.at $44.50,500 shares of BuyRite at $52.90,and 100 shares of MotorCity at $9.25,what are the portfolio weights of each stock?

Which of the following is correct regarding the coefficient of variation?

An investor owns $8,000 of Adobe Systems stock,$5,000 of Dow Chemical,and $3,000 of Office Depot.What are the portfolio weights of each stock?

Jenna receives an investment newsletter that recommends that she invest in a stock that has doubled the return of the S&P 500 in the last two months.It also claims that this stock is a "safe bet" for the future.Which of the following statements is correct regarding this information?

Year to date,Company Y had earned a 10.8 percent return.During the same time period,Company R earned 12.20 percent and Company C earned −1.56 percent.If you have a portfolio made up of 45 percent Y,35 percent R,and 20 percent C,what is your portfolio return?

Which of the following describes what will occur as you randomly add stocks to your portfolio?

Which of these is a measure summarizing the overall past performance of an investment?

Rank the following three stocks by their level of total risk,highest to lowest.Rail Haul has an average return of 10 percent and standard deviation of 15 percent.The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

The standard deviation of the past five monthly returns for K and Company are 4.25 percent,4.13 percent,−2.05 percent,3.25 percent,and 7.75 percent.What is the standard deviation?

At the beginning of the month,you owned $15,500 of General Motors,$4,500 of Starbucks,and $9,000 of Nike.The monthly returns for General Motors,Starbucks,and Nike were 7.10 percent,−1.36 percent,and −0.54 percent.What is your portfolio return?

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

The past five monthly returns for PG Company are 1.25 percent,−1.50 percent,4.25 percent,3.75 percent,and 1.98 percent.What is the average monthly return?

We commonly measure the risk-return relationship using which of the following?

Which of the following is correct?

The past five monthly returns for K and Company are 2.28 percent,2.64 percent,−1.05 percent,4.25 percent,and 9.25 percent.What is the average monthly return?

Year-to-date,Oracle had earned a 12.57 percent return.During the same time period,Valero Energy earned −9.32 percent and McDonald's earned 3.45 percent.If you have a portfolio made up of 60 percent Oracle,20 percent Valero Energy,and 20 percent McDonald's,what is your portfolio return?

Which of these is the term for portfolios with the highest return possible for each risk level?

Interest rates,inflation and economic growth are economic factors that are examples of:

Rank the following three stocks by their risk-return relationship,best to worst.Night Ryder has an average return of 33 percent and standard deviation of 40 percent.The average return and standard deviation of WholeMart are 10 percent and 20 percent; and of Fruit Fly are 19 percent and 33 percent.

If you own 400 shares of Air Line Inc.at $44.50,500 shares of BuyRite at $52.90,and 100 shares of MotorCity at $9.25,what are the portfolio weights of each stock?

Which of the following is correct regarding the coefficient of variation?

An investor owns $8,000 of Adobe Systems stock,$5,000 of Dow Chemical,and $3,000 of Office Depot.What are the portfolio weights of each stock?

Jenna receives an investment newsletter that recommends that she invest in a stock that has doubled the return of the S&P 500 in the last two months.It also claims that this stock is a "safe bet" for the future.Which of the following statements is correct regarding this information?

Year to date,Company Y had earned a 10.8 percent return.During the same time period,Company R earned 12.20 percent and Company C earned −1.56 percent.If you have a portfolio made up of 45 percent Y,35 percent R,and 20 percent C,what is your portfolio return?

Which of the following describes what will occur as you randomly add stocks to your portfolio?

Which of these is a measure summarizing the overall past performance of an investment?

Rank the following three stocks by their level of total risk,highest to lowest.Rail Haul has an average return of 10 percent and standard deviation of 15 percent.The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

The standard deviation of the past five monthly returns for K and Company are 4.25 percent,4.13 percent,−2.05 percent,3.25 percent,and 7.75 percent.What is the standard deviation?

At the beginning of the month,you owned $15,500 of General Motors,$4,500 of Starbucks,and $9,000 of Nike.The monthly returns for General Motors,Starbucks,and Nike were 7.10 percent,−1.36 percent,and −0.54 percent.What is your portfolio return?

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