Question 1

The expected rate of return is the sum of each possible return times it likelihood of occurrence.

Accepted Answer

A) True 
 B)False  True

Question 2

If there is a 20% chance we will get a 16% return,a 30% chance of getting a 14% return,a 40% chance of getting a 12% return,and a 10% chance of getting an 8% return,what is the expected rate of return?

Accepted Answer

A) 12% 
B) 13% 
C) 14% 
D) 15% 
A) 12% 
B) 13% 
C) 14% 
D) 15% B

Question 3

Which of the following is consistent with the efficient market hypothesis?

Accepted Answer

A) so-called value stocks outperform growth stocks. 
B) stocks that have performed well over the past year continue to perform well for several more months. 
C) a company announces higher than expected sales and earnings.The stock price immediately increases by 10%. 
D) a company announces higher than expected sales and earnings.The stock price remains unchanged. 
A) so-called value stocks outperform growth stocks. 
B) stocks that have performed well over the past year continue to perform well for several more months. 
C) a company announces higher than expected sales and earnings.The stock price immediately increases by 10%. 
D) a company announces higher than expected sales and earnings.The stock price remains unchanged. C

Question 4

If an individual with inside information can make higher than expected profits,the market is no more than semi-strong form efficient.

Accepted Answer

A) True 
 B)False

Question 5

An investor who wishes to hold a stock for five years will be most interested in geometric average rather than in the arithmetic average return.

Accepted Answer

A) True 
 B)False

Question 6

Marcus Berger invested $9842.33 in Hawkeyehats,Inc.four years ago.He sold the stock today for $11,396.22.What is his geometric average return?

Accepted Answer

A) 2.98% 
B) 3.73% 
C) 3.95% 
D) There is insufficient information to derive an answer. 
A) 2.98% 
B) 3.73% 
C) 3.95% 
D) There is insufficient information to derive an answer.

Question 7

If a market is weak form efficient,an investor can make higher than expected profits by studying the past price patterns of a stock.

Accepted Answer

A) True 
 B)False

Question 8

Using the following information for McDonovan,Inc.'s stock,calculate their expected return and standard deviation.
State Probability Return
Boom 20% 40%
Normal 60% 15%
Recession 20% (20%)

Accepted Answer

Ki = @#IMG-DLM& 
= (.20)(40%)+ (.60)(15%

Question 9

Stock prices go up when there is positive information about a company,and go down when there is negative information about the company.

Accepted Answer

A) True 
 B)False

Question 10

Use the following information to answer the following question(s).
Susan Bright will get returns of 18%,-20.3%,-14%,17.6%,and 8.3% in the next five years on her investment in CoffeeTown,Inc.stock,which she purchases for $73,419.66 today.
-What is the arithmetic average return on her stock if she sells it five years from today?

Accepted Answer

A) 1.92% 
B) 3.98% 
C) 6.47% 
D) 7.11% 
A) 1.92% 
B) 3.98% 
C) 6.47% 
D) 7.11%

Question 11

Less risky investments have lower standard deviations than do more risky investments.

Accepted Answer

A) True 
 B)False

Question 12

The cash return on an investment is calculated as purchase price-selling price.

Accepted Answer

A) True 
 B)False

Question 13

Use the following information to answer the following question(s).
Susan Bright will get returns of 18%,-20.3%,-14%,17.6%,and 8.3% in the next five years on her investment in CoffeeTown,Inc.stock,which she purchases for $73,419.66 today.
-What is the geometric average return on her stock if she sells it five years from today?

Accepted Answer

A) -2.33% 
B) .59% 
C) 3.67% 
D) 4.88% 
A) -2.33% 
B) .59% 
C) 3.67% 
D) 4.88%

Question 14

You have invested in a project that has the following payoff schedule:
Probability of
Payoff Occurrence
$40 .15
$50 .20
$60 .30
$70 .30
$80 .05
What is the expected value of the investment's payoff? (Round to the nearest $1. )

Accepted Answer

A) $60 
B) $65 
C) $58 
D) $70 
A) $60 
B) $65 
C) $58 
D) $70

Question 15

Spartan Sofas,Inc.is selling for $50.00 per share today.In one year,Spartan will be selling for $48.00 per share,and the dividend for the year will be $3.00.What is the cash return on Spartan stock?

Accepted Answer

A) $51.00 
B) $1.00 
C) $2.00 
D) $3.00 
A) $51.00 
B) $1.00 
C) $2.00 
D) $3.00

Question 16

How much will Susan's stock be worth if she sells it five years from today?

Accepted Answer

A) $71,423.85 
B) $73,419.66 
C) $75,628.75 
D) $80,333.40 
A) $71,423.85 
B) $73,419.66 
C) $75,628.75 
D) $80,333.40

Question 17

An emerging market is

Accepted Answer

A) a market for small,but rapidly growing companies. 
B) market for companies coming out from bankruptcy proceedings. 
C) market for promising,but untested technologies. 
D) a market located in an economy with low to middle per capita income. 
A) a market for small,but rapidly growing companies. 
B) market for companies coming out from bankruptcy proceedings. 
C) market for promising,but untested technologies. 
D) a market located in an economy with low to middle per capita income.

Question 18

Investments in emerging markets have higher volatility than do U.S.Stocks.

Accepted Answer

A) True 
 B)False

Question 19

Risky investments have the potential for higher returns,but also larger losses.

Accepted Answer

A) True 
 B)False

Question 20

Are markets moving toward being more efficient or toward being less efficient?

Accepted Answer

Empirical evidence shows that since abou

The expected rate of return is the sum of each possible return times it likelihood of occurrence.

If there is a 20% chance we will get a 16% return,a 30% chance of getting a 14% return,a 40% chance of getting a 12% return,and a 10% chance of getting an 8% return,what is the expected rate of return?

Which of the following is consistent with the efficient market hypothesis?

If an individual with inside information can make higher than expected profits,the market is no more than semi-strong form efficient.

An investor who wishes to hold a stock for five years will be most interested in geometric average rather than in the arithmetic average return.

Marcus Berger invested $9842.33 in Hawkeyehats,Inc.four years ago.He sold the stock today for $11,396.22.What is his geometric average return?

If a market is weak form efficient,an investor can make higher than expected profits by studying the past price patterns of a stock.

Using the following information for McDonovan,Inc.'s stock,calculate their expected return and standard deviation. State Probability Return Boom 20% 40% Normal 60% 15% Recession 20% (20%)

Stock prices go up when there is positive information about a company,and go down when there is negative information about the company.

Less risky investments have lower standard deviations than do more risky investments.

The cash return on an investment is calculated as purchase price-selling price.

You have invested in a project that has the following payoff schedule: Probability of Payoff Occurrence $40 .15 $50 .20 $60 .30 $70 .30 $80 .05 What is the expected value of the investment's payoff? (Round to the nearest $1. )

Spartan Sofas,Inc.is selling for $50.00 per share today.In one year,Spartan will be selling for $48.00 per share,and the dividend for the year will be $3.00.What is the cash return on Spartan stock?

How much will Susan's stock be worth if she sells it five years from today?

An emerging market is

Investments in emerging markets have higher volatility than do U.S.Stocks.

Risky investments have the potential for higher returns,but also larger losses.

Are markets moving toward being more efficient or toward being less efficient?

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 7: An Introduction to Risk and Return-History of Financial Market Returns

The expected rate of return is the sum of each possible return times it likelihood of occurrence.

If there is a 20% chance we will get a 16% return,a 30% chance of getting a 14% return,a 40% chance of getting a 12% return,and a 10% chance of getting an 8% return,what is the expected rate of return?

Which of the following is consistent with the efficient market hypothesis?

If an individual with inside information can make higher than expected profits,the market is no more than semi-strong form efficient.

An investor who wishes to hold a stock for five years will be most interested in geometric average rather than in the arithmetic average return.

Marcus Berger invested $9842.33 in Hawkeyehats,Inc.four years ago.He sold the stock today for $11,396.22.What is his geometric average return?

If a market is weak form efficient,an investor can make higher than expected profits by studying the past price patterns of a stock.

Using the following information for McDonovan,Inc.'s stock,calculate their expected return and standard deviation. State Probability Return Boom 20% 40% Normal 60% 15% Recession 20% (20%)

Stock prices go up when there is positive information about a company,and go down when there is negative information about the company.

Less risky investments have lower standard deviations than do more risky investments.

The cash return on an investment is calculated as purchase price-selling price.

You have invested in a project that has the following payoff schedule: Probability of Payoff Occurrence $40 .15 $50 .20 $60 .30 $70 .30 $80 .05 What is the expected value of the investment's payoff? (Round to the nearest $1. )

Spartan Sofas,Inc.is selling for $50.00 per share today.In one year,Spartan will be selling for $48.00 per share,and the dividend for the year will be $3.00.What is the cash return on Spartan stock?

How much will Susan's stock be worth if she sells it five years from today?

An emerging market is

Investments in emerging markets have higher volatility than do U.S.Stocks.

Risky investments have the potential for higher returns,but also larger losses.

Are markets moving toward being more efficient or toward being less efficient?

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters