Question 1

The difference between returns on shares and government bonds is known as

Accepted Answer

A) the equity risk premium. 
B) the risk and return tradeoff. 
C) the maturity premium. 
D) the risk/reward paradox. 
A) the equity risk premium. 
B) the risk and return tradeoff. 
C) the maturity premium. 
D) the risk/reward paradox. A

Question 2

Which of the following sequences is arranged in the correct order,from highest expected long-term returns to lowest?

Accepted Answer

A) Small shares,government bonds,large shares 
B) Large shares,treasury notes,small shares 
C) Small shares,large shares,treasury notes 
D) Government bonds,large shares,treasury notes 
A) Small shares,government bonds,large shares 
B) Large shares,treasury notes,small shares 
C) Small shares,large shares,treasury notes 
D) Government bonds,large shares,treasury notes C

Question 3

An emerging market is

Accepted Answer

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

Question 4

You purchased a share of ASX Limited at a price of $75.75 one year ago today.If you sell the share today for $89.00 and did not collect a dividend what is your rate of return?

Accepted Answer

A) 35.00% 
B) 12.50% 
C) 17.50% 
D) 25.00% 
A) 35.00% 
B) 12.50% 
C) 17.50% 
D) 25.00%

Question 5

How much will Susan's share 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 6

Even though an investor expects a positive rate of return,it is possible that the actual return will be negative.

Accepted Answer

A) True 
 B)False

Question 7

Under the efficient market hypothesis,would securities be properly priced?

Accepted Answer

If markets were perfectly efficient,then

Question 8

Investors are always rewarded for taking higher risk with higher realised returns.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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

Accepted Answer

A) So-called value shares outperform growth shares. 
B) Shares 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 share price immediately increases by 10%. 
D) A company announces higher than expected sales and earnings.The share price remains unchanged. 
A) So-called value shares outperform growth shares. 
B) Shares 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 share price immediately increases by 10%. 
D) A company announces higher than expected sales and earnings.The share price remains unchanged.

Question 11

You are considering investing in a firm that has the following possible outcomes: Economic boom: probability of 25%;return of 25%
Economic growth: probability of 60%;return of 15%
Economic decline: probability of 15%;return of -5%
What is the expected rate of return on the investment?

Accepted Answer

A) 15.0% 
B) 11.7% 
C) 14.5% 
D) 25.0% 
A) 15.0% 
B) 11.7% 
C) 14.5% 
D) 25.0%

Question 12

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 a CB Australia Limited share,which she purchases for $73,419.66 today.
-What is the arithmetic average return on her share 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 13

Marcus Berger invested $9842.33 in GB Energy Limited four years ago.He sold the shares 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 14

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 a CB Australia Limited share,which she purchases for $73,419.66 today.
-What is the geometric average return on her share 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 15

Investments in emerging markets have higher volatility than do Australian shares.

Accepted Answer

A) True 
 B)False

Question 16

Jayden spends a lot of time studying charts of shares past performance,but his investment returns are only average.This outcome supports

Accepted Answer

A) the weak-form efficient market hypothesis. 
B) the semi-strong form efficient market hypothesis. 
C) the strong form efficient market hypothesis. 
D) all of the above. 
A) the weak-form efficient market hypothesis. 
B) the semi-strong form efficient market hypothesis. 
C) the strong form efficient market hypothesis. 
D) all of the above.

Question 17

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

Accepted Answer

Empirical evidence shows that since abou

Question 18

Use the following to answer the following question(s).
Roddy Richards invested $12014.88 in Atron Enterprises five years ago.The investment had yearly arithmetic returns of -9.7%,-8.1%,15%,7.2%,and 15.4%.
-What is the arithmetic average return of Roddy Richard's investment?

Accepted Answer

A) 2.42% 
B) 3.96% 
C) 5.18% 
D) 15.1% 
A) 2.42% 
B) 3.96% 
C) 5.18% 
D) 15.1%

Question 19

If an investor holds a share for three years,the value at the end of three years will always be the initial cost of the share times (1 + arithmetic average return)to the third power.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

The difference between returns on shares and government bonds is known as

Which of the following sequences is arranged in the correct order,from highest expected long-term returns to lowest?

An emerging market is

You purchased a share of ASX Limited at a price of $75.75 one year ago today.If you sell the share today for $89.00 and did not collect a dividend what is your rate of return?

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

Even though an investor expects a positive rate of return,it is possible that the actual return will be negative.

Under the efficient market hypothesis,would securities be properly priced?

Investors are always rewarded for taking higher risk with higher realised returns.

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

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

You are considering investing in a firm that has the following possible outcomes: Economic boom: probability of 25%;return of 25% Economic growth: probability of 60%;return of 15% Economic decline: probability of 15%;return of -5% What is the expected rate of return on the investment?

Marcus Berger invested $9842.33 in GB Energy Limited four years ago.He sold the shares today for $11,396.22.What is his geometric average return?

Investments in emerging markets have higher volatility than do Australian shares.

Jayden spends a lot of time studying charts of shares past performance,but his investment returns are only average.This outcome supports

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

Use the following to answer the following question(s). Roddy Richards invested $12014.88 in Atron Enterprises five years ago.The investment had yearly arithmetic returns of -9.7%,-8.1%,15%,7.2%,and 15.4%. -What is the arithmetic average return of Roddy Richard's investment?

If an investor holds a share for three years,the value at the end of three years will always be the initial cost of the share times (1 + arithmetic average return)to the third power.

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

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

Share Valuation

Investment Decision Criteria

Analysing 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 difference between returns on shares and government bonds is known as

Which of the following sequences is arranged in the correct order,from highest expected long-term returns to lowest?

An emerging market is

You purchased a share of ASX Limited at a price of $75.75 one year ago today.If you sell the share today for $89.00 and did not collect a dividend what is your rate of return?

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

Even though an investor expects a positive rate of return,it is possible that the actual return will be negative.

Under the efficient market hypothesis,would securities be properly priced?

Investors are always rewarded for taking higher risk with higher realised returns.

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

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

You are considering investing in a firm that has the following possible outcomes: Economic boom: probability of 25%;return of 25% Economic growth: probability of 60%;return of 15% Economic decline: probability of 15%;return of -5% What is the expected rate of return on the investment?

Marcus Berger invested $9842.33 in GB Energy Limited four years ago.He sold the shares today for $11,396.22.What is his geometric average return?

Investments in emerging markets have higher volatility than do Australian shares.

Jayden spends a lot of time studying charts of shares past performance,but his investment returns are only average.This outcome supports

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

Use the following to answer the following question(s). Roddy Richards invested $12014.88 in Atron Enterprises five years ago.The investment had yearly arithmetic returns of -9.7%,-8.1%,15%,7.2%,and 15.4%. -What is the arithmetic average return of Roddy Richard's investment?

If an investor holds a share for three years,the value at the end of three years will always be the initial cost of the share times (1 + arithmetic average return)to the third power.

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

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

Share Valuation

Investment Decision Criteria

Analysing 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