Exam 4: Return and Risk

When using a financial calculator or electronic spreadsheet to calculate an investment's yield, the amount invested is expressed as a negative number.

Historically, what is the correct ranking of the following securities from lowest rate of return to the Highest?

When investors expect higher inflation, they will generally require higher rates of return.

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

David has purchased an investment that he expects to produce an annual cash flow of $3,000 for five years.He requires an 8% rate of return compounded annually.What is the maximum amount that David can pay and still earn the required rate of return?

The expected rate of return and standard deviations, respectively for four stocks are given below: ABC 9%, 3% CDE 11%, 9% FGH 12%, 8% IJK 14%, 10% Which stock is clearly least desirable?

Congress considers a bill that would eliminate the mortgage interest deduction for individuals.For the housing industry, this is an example of

Inflation tends to have a particularly negative impact on the price of

The most predictable component of stock returns is

Rational investor's are motivated to purchase an asset because of its

Six years ago, Miguel invested $3,500.Today his investment is worth $5659.The internal rate of return on this investment is

Jeremy purchased 100 shares of FB for $19 per share in September 2012 and sold them 3 years later at $91 per share.At what annual rate did the value of his investment grow?

Explain the similarities and differences between the holding period return and the internal rate of return.

The internal rate of return is a less meaningful measure of an investment's performance than holding period return if the holding period is other than 1 year.

In response to the same external force, the return on one investment may increase while the return on another investment may decrease.

The stock of Plomb Co.falls sharply on news that its CEO has drowned in a boating accident while on vacation.This is an example of

If you own an investment providing periodic returns, your actual yield on the investment will depend on the reinvestment rate you are able to obtain.

The required return on a risky investment includes a real rate of return, an inflation premium and a risk premium.

Sydney invested $10,000 for an indefinite period at 5% per year.At the end of each year, she receives a $500 check for interest earned.This type of account pays simple interest.

It is not possible for the nominal risk-free rate of return to be lower than the rate of inflation.