Question 1

Which one following will lower required rates of return?

Accepted Answer

A)  Lower dividend yields. 
B)  Lower rates of inflation. 
C)  Higher rates of inflation. 
D)  Higher risk premiums.

Question 2

An investment produced annual rates of return of 5%, 12%, 8% and 11%, respectively, over the past four years. What is the standard deviation of these returns?

Accepted Answer

A)  3.2%. 
B)  2.7%. 
C)  3.6%. 
D)  3.8%.

Question 3

Christopher invests $400 today at a 4% rate of return which is compounded annually. What is the future value of this investment after four years?

Accepted Answer

A)  $464 
B)  $342 
C)  $468 
D)  $416

Question 4

Inflation tends to have a favourable impact on

Accepted Answer

A)  bonds. 
B)  real estate. 
C)  ordinary share. 
D)  preference share.

Question 5

Which one of the following is an internal characteristic that can affect the value of an investment?

Accepted Answer

A)  War. 
B)  Use of debt financing. 
C)  Inflation. 
D)  Reserve Bank actions.

Question 6

The Sorka Corp. has paid annual dividends of $0.60, $0.63, $0.65, $0.68 and $0.72, respectively, over the past five years. What is the dividend growth rate?

Accepted Answer

A)  4.7%. 
B)  5.9%. 
C)  5.2%. 
D)  5.4%.

Question 7

The yield on an investment is equal to its internal rate of return.

Accepted Answer

A) True 
 B)False

Question 8

An ordinary annuity has cash flows that occur at the__________ of each time period and are__________ in amount.

Accepted Answer

A)  beginning; constant 
B)  end; variable 
C)  beginning; variable 
D)  end; constant

Question 9

The holding period return should not be used when analysing investments with unequal holding periods.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The standard deviation is computed by dividing the sum of the squared deviations by the number of observations.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The value of an investment paying 4% compounded quarterly will have a value at the end of one year equal to

Accepted Answer

A)  an investment paying 4% compounded annually at the end of 4 years. 
B)  an investment paying 1% compounded annually at the end of 4 years. 
C)  an investment paying 2% compounded semi- annually at the end of 1 year. 
D)  an investment paying 16% compounded annually at the end of 1 year.

Question 14

Investors who limit themselves to risk free and low risk investments can avoid purchasing power risk.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

The answer of Explain the similarities and differences between the...

Question 16

An interest rate of 6.18% compounded daily is equivalent to 6% compounded annually.

Accepted Answer

A) True 
 B)False

Question 17

If you invest $2,000 at the end of each year for five years and you earn 7% interest compounded annually, how much will you have accumulated at the end of the fifth year?

Accepted Answer

A)  $12,307 
B)  $11,501 
C)  $14,026 
D)  $10,700

Question 18

If the discount rate is appropriate for the level of risk, a satisfactory investment will have a present value of benefits equal to or greater than than the present value of costs.

Accepted Answer

A) True 
 B)False

Question 19

Shares in which of the following industries may be impacted by government actions?

Accepted Answer

A)  Housing. 
B)  Health Care. 
C)  Defence. 
D)  All of the above.

Question 20

Identify and discuss five sources of risk.

Accepted Answer

The answer of Identify and discuss five sources of risk....

Exam 4: Return and Risk

Which one following will lower required rates of return?

An investment produced annual rates of return of 5%, 12%, 8% and 11%, respectively, over the past four years. What is the standard deviation of these returns?

Christopher invests $400 today at a 4% rate of return which is compounded annually. What is the future value of this investment after four years?

Inflation tends to have a favourable impact on

Which one of the following is an internal characteristic that can affect the value of an investment?

The Sorka Corp. has paid annual dividends of $0.60, $0.63, $0.65, $0.68 and $0.72, respectively, over the past five years. What is the dividend growth rate?

The yield on an investment is equal to its internal rate of return.

An ordinary annuity has cash flows that occur at the of each time period and are in amount.

The holding period return should not be used when analysing investments with unequal holding periods.

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

The standard deviation is computed by dividing the sum of the squared deviations by the number of observations.

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

The value of an investment paying 4% compounded quarterly will have a value at the end of one year equal to

Investors who limit themselves to risk free and low risk investments can avoid purchasing power risk.

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

An interest rate of 6.18% compounded daily is equivalent to 6% compounded annually.

If you invest $2,000 at the end of each year for five years and you earn 7% interest compounded annually, how much will you have accumulated at the end of the fifth year?

If the discount rate is appropriate for the level of risk, a satisfactory investment will have a present value of benefits equal to or greater than than the present value of costs.

Shares in which of the following industries may be impacted by government actions?

Identify and discuss five sources of risk.