Question 1

Calculate the real rate of interest if the nominal rate of interest is 9.3% and the inflation rate is 3.25%.

Accepted Answer

A) 7.86% 
B) 6.86% 
C) 5.86% 
D) 4.86% 
A) 7.86% 
B) 6.86% 
C) 5.86% 
D) 4.86%

Question 2

Which of the following risks would be classified as a unique risk for an auto manufacturer?

Accepted Answer

A) Interest rates 
B) Steel prices 
C) Business cycles 
D) Foreign exchange rates 
A) Interest rates 
B) Steel prices 
C) Business cycles 
D) Foreign exchange rates

Question 3

If the stock market return in 2008 turns out to be 30 percent, what will happen to our estimate of the "normal" risk premium? Does this make sense?

Accepted Answer

If we use historical averages to compute

Question 4

What is the approximate standard deviation of returns for a one-year project that is equally likely to return 100 percent as it is to provide a 100 percent loss?

Accepted Answer

A) 0 percent 
B) 50 percent 
C) 71 percent 
D) 100 percent Mean = (.5 x 100%) + (.5 x-100)
= 50-50
= 0%
Variance = 
A) 0 percent 
B) 50 percent 
C) 71 percent 
D) 100 percent Mean = (.5 x 100%) + (.5 x-100)
= 50-50
= 0%
Variance =

Question 5

What is the percentage return on a stock that was purchased for $40.00 and paid a $3.00 dividend after one year, then sold for $39.00?

Accepted Answer

A) (2.50 percent) 
B) 2.50 percent 
C) 5.00 percent 
D) 7.50 percent 
A) (2.50 percent) 
B) 2.50 percent 
C) 5.00 percent 
D) 7.50 percent

Question 6

Explain the concepts of unique risk, market risk, and how the total level of portfolio risk can change by adding additional securities.

Accepted Answer

Unique or diversifiable risks affect spe

Question 7

What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000, has an 8 percent coupon, and was sold for $960 when the inflation rate was 6 percent?

Accepted Answer

A) -1.89 percent 
B) 1.92 percent 
C) 5.66 percent 
D) 11.47 percent Nominal return = 
A) -1.89 percent 
B) 1.92 percent 
C) 5.66 percent 
D) 11.47 percent Nominal return =

Calculate the real rate of interest if the nominal rate of interest is 9.3% and the inflation rate is 3.25%.

Which of the following risks would be classified as a unique risk for an auto manufacturer?

If the stock market return in 2008 turns out to be 30 percent, what will happen to our estimate of the "normal" risk premium? Does this make sense?

What is the approximate standard deviation of returns for a one-year project that is equally likely to return 100 percent as it is to provide a 100 percent loss?

What is the percentage return on a stock that was purchased for $40.00 and paid a $3.00 dividend after one year, then sold for $39.00?

Explain the concepts of unique risk, market risk, and how the total level of portfolio risk can change by adding additional securities.

What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000, has an 8 percent coupon, and was sold for $960 when the inflation rate was 6 percent?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

Filters

Exam 11: Introduction to Risk, Return, and the Opportunity Cost of Capital

Calculate the real rate of interest if the nominal rate of interest is 9.3% and the inflation rate is 3.25%.

Which of the following risks would be classified as a unique risk for an auto manufacturer?

If the stock market return in 2008 turns out to be 30 percent, what will happen to our estimate of the "normal" risk premium? Does this make sense?

What is the approximate standard deviation of returns for a one-year project that is equally likely to return 100 percent as it is to provide a 100 percent loss?

What is the percentage return on a stock that was purchased for $40.00 and paid a $3.00 dividend after one year, then sold for $39.00?

Explain the concepts of unique risk, market risk, and how the total level of portfolio risk can change by adding additional securities.

What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000, has an 8 percent coupon, and was sold for $960 when the inflation rate was 6 percent?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

Filters