Question 1

If a financial asset has a historical variance of 4% squared25, then its standard deviation must be 12.56%.

Accepted Answer

A) True 
 B)False  False

Question 2

The Capital Asset Pricing Model states that the expected return on an asset depends on its level of unsystematic risk.

Accepted Answer

A) True 
 B)False  False

Question 3

Variations in a firm's tax rate and tax-related charges over time due to changing tax laws and regulations is called:

Accepted Answer

A) interest rate risk 
B) business risk 
C) tax risk Deleted-answer is too obvious 
D) purchasing power risk 
E) none of the above 
A) interest rate risk 
B) business risk 
C) tax risk Deleted-answer is too obvious 
D) purchasing power risk 
E) none of the above C

Question 4

If Stock A had a price of $120 at the beginning of the year, $150 at the end of the year and paid a $6 dividend during the year, what would be the annualized holding period return?

Accepted Answer

A) 36% 
B) 30% 
C) 24% 
D) none of the above 
A) 36% 
B) 30% 
C) 24% 
D) none of the above

Question 5

Research suggests that a portfolio of 20 or 30 different stocks has can eliminated most of the a portfolio's systematic risk.

Accepted Answer

A) True 
 B)False

Question 6

If a person requires greater return when risk increases, that person is said to be:

Accepted Answer

A) risk seeking 
B) risk averse 
C) risk aware 
D) risk indifferent 
E) none of the above 
A) risk seeking 
B) risk averse 
C) risk aware 
D) risk indifferent 
E) none of the above

Question 7

A weak-form efficient market is a market in which prices reflect all past information.

Accepted Answer

A) True 
 B)False

Question 8

If one were to rank different assets from highest to lowest the basis of average historical return, the ranking would be:

Accepted Answer

A) long-term corporate bonds, large company stocks, long term government bonds, small company stocks, US Treasury bills 
B) small company stocks, large company stocks, long-term corporate bonds, long term government bonds, US Treasury bills 
C) US Treasury bills, long term government bonds, long term corporate bonds, large company stocks, small company stocks 
D) none of the above 
A) long-term corporate bonds, large company stocks, long term government bonds, small company stocks, US Treasury bills 
B) small company stocks, large company stocks, long-term corporate bonds, long term government bonds, US Treasury bills 
C) US Treasury bills, long term government bonds, long term corporate bonds, large company stocks, small company stocks 
D) none of the above

Question 9

The risk of a portfolio is simply equal to the weighted average return variance of the securities that comprise it.

Accepted Answer

A) True 
 B)False

Question 10

The security market line can be used to determine the expected return on a security if we know the:

Accepted Answer

A) risk-free rate 
B) systematic risk of that security 
C) market risk premium 
D) all of the above 
A) risk-free rate 
B) systematic risk of that security 
C) market risk premium 
D) all of the above

Question 11

The term "ex-ante" refers to the past or historical information.

Accepted Answer

A) True 
 B)False

Question 12

Diversification occurs when we invest in several different assets rather than just a single one.

Accepted Answer

A) True 
 B)False

Question 13

During the onset of the Financial Crisis between 2007 and 2008, the returns on stocks and treasury bonds

Accepted Answer

A) converged 
B) convened 
C) were about the same 
D) were unrelated 
E) none of the above 
A) converged 
B) convened 
C) were about the same 
D) were unrelated 
E) none of the above

Question 14

The ____________ the coefficient of variation, the ____________ the risk.

Accepted Answer

A) lower, lower 
B) higher, lower 
C) lower, higher 
D) more stable, higher 
E) none of the above 
A) lower, lower 
B) higher, lower 
C) lower, higher 
D) more stable, higher 
E) none of the above

Question 15

If we assume that asset X has an expected return of 10 percent and a variance of 10 percent squared, then its coefficient of variation is:

Accepted Answer

A) 3.162 
B) 1.000 
C) 0.316 
D) none of the above 
A) 3.162 
B) 1.000 
C) 0.316 
D) none of the above

Question 16

Any consistent predictable trend in the same direction as the price change would be evidence of an efficient market.

Accepted Answer

A) True 
 B)False

Question 17

During the onset of the Financial Crisis between 2007 and 2008, an investor would have earned the greatest return if he or she had invested in

Accepted Answer

A) only stocks 
B) only Treasury bonds 
C) a portfolio consisting of 50% stocks and 50% Treasury bonds 
D) a non-interest bearing cash account 
E) none of the above 
A) only stocks 
B) only Treasury bonds 
C) a portfolio consisting of 50% stocks and 50% Treasury bonds 
D) a non-interest bearing cash account 
E) none of the above

Question 18

The total risk of a well-diversified international portfolio of stocks appears to be about what proportion of the risk of an average one-stock portfolio?

Accepted Answer

A) one-quarterthird 
B) one-thirdhalf 
C) two-thirdsone-half 
D) two-thirds de.three-fourths 
A) one-quarterthird 
B) one-thirdhalf 
C) two-thirdsone-half 
D) two-thirds de.three-fourths

Question 19

In general, large company stocks are less more risky than small company stocksTreasury bonds.
Large cap stock vs small cap stock comparison is no longer in the chapter.

Accepted Answer

A) True 
 B)False

Question 20

The coefficient of variation measures the risk per unit of return.

Accepted Answer

A) True 
 B)False

If a financial asset has a historical variance of 4% squared25, then its standard deviation must be 12.56%.

The Capital Asset Pricing Model states that the expected return on an asset depends on its level of unsystematic risk.

Variations in a firm's tax rate and tax-related charges over time due to changing tax laws and regulations is called:

If Stock A had a price of $120 at the beginning of the year, $150 at the end of the year and paid a $6 dividend during the year, what would be the annualized holding period return?

Research suggests that a portfolio of 20 or 30 different stocks has can eliminated most of the a portfolio's systematic risk.

If a person requires greater return when risk increases, that person is said to be:

A weak-form efficient market is a market in which prices reflect all past information.

If one were to rank different assets from highest to lowest the basis of average historical return, the ranking would be:

The risk of a portfolio is simply equal to the weighted average return variance of the securities that comprise it.

The security market line can be used to determine the expected return on a security if we know the:

The term "ex-ante" refers to the past or historical information.

Diversification occurs when we invest in several different assets rather than just a single one.

During the onset of the Financial Crisis between 2007 and 2008, the returns on stocks and treasury bonds

The the coefficient of variation, the the risk.

If we assume that asset X has an expected return of 10 percent and a variance of 10 percent squared, then its coefficient of variation is:

Any consistent predictable trend in the same direction as the price change would be evidence of an efficient market.

During the onset of the Financial Crisis between 2007 and 2008, an investor would have earned the greatest return if he or she had invested in

The total risk of a well-diversified international portfolio of stocks appears to be about what proportion of the risk of an average one-stock portfolio?

In general, large company stocks are less more risky than small company stocksTreasury bonds. Large cap stock vs small cap stock comparison is no longer in the chapter.

The coefficient of variation measures the risk per unit of return.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 12: Financial Return and Risk Concepts

If a financial asset has a historical variance of 4% squared25, then its standard deviation must be 12.56%.

The Capital Asset Pricing Model states that the expected return on an asset depends on its level of unsystematic risk.

Variations in a firm's tax rate and tax-related charges over time due to changing tax laws and regulations is called:

If Stock A had a price of $120 at the beginning of the year, $150 at the end of the year and paid a $6 dividend during the year, what would be the annualized holding period return?

Research suggests that a portfolio of 20 or 30 different stocks has can eliminated most of the a portfolio's systematic risk.

If a person requires greater return when risk increases, that person is said to be:

A weak-form efficient market is a market in which prices reflect all past information.

If one were to rank different assets from highest to lowest the basis of average historical return, the ranking would be:

The risk of a portfolio is simply equal to the weighted average return variance of the securities that comprise it.

The security market line can be used to determine the expected return on a security if we know the:

The term "ex-ante" refers to the past or historical information.

Diversification occurs when we invest in several different assets rather than just a single one.

During the onset of the Financial Crisis between 2007 and 2008, the returns on stocks and treasury bonds

The ____________ the coefficient of variation, the ____________ the risk.

If we assume that asset X has an expected return of 10 percent and a variance of 10 percent squared, then its coefficient of variation is:

Any consistent predictable trend in the same direction as the price change would be evidence of an efficient market.

During the onset of the Financial Crisis between 2007 and 2008, an investor would have earned the greatest return if he or she had invested in

The total risk of a well-diversified international portfolio of stocks appears to be about what proportion of the risk of an average one-stock portfolio?

In general, large company stocks are less more risky than small company stocksTreasury bonds. Large cap stock vs small cap stock comparison is no longer in the chapter.

The coefficient of variation measures the risk per unit of return.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

The the coefficient of variation, the the risk.