$\begin{array}{|l|c|c|} \hline \text { Asset } & \begin{array}{c} \text { Expected return } \\ (\mathrm{E}(\mathrm{R}) \boldsymbol{)} \end{array} & \begin{array}{c} \text { Standard deviation } \\ \text { (ธ) } \end{array} \\ \hline \mathrm{A} & 10 \% & 9 \% \\ \hline \mathrm{B} & 12 \% & 8 \% \\ \hline \mathrm{C} & 15 \% & 12 \% \\ \hline \mathrm{D} & 13 \% & 11 \% \\ \hline \end{array}$ -Given no other information other than the expected returns and risk,which asset would a risk-averse investor prefer?

A) $\text { Asset A }$ B) $\text { Asset B}$ C) $\text { Asset C}$ D) $\text { Asset D }$ A) $\text { Asset A }$ B) $\text { Asset B}$ C) $\text { Asset C}$ D) $\text { Asset D }$

$\begin{array}{|c|c|} \hline \text { Year } & \begin{array}{c} \text { Return } \\ \mathbf{( \% )} \end{array} \\ \hline \text { Year } 1 & 7 \% \\ \hline \text { Year } 2 & 17 \% \\ \hline \text { Year } 3 & -2.4 \% \\ \hline \text { Year } 4 & 2 \% \\ \hline \end{array}$ -The value of an investment at the end of each of four years is shown above.What is the geometric cumulative return over the four years?

A) $15.1 \%$ B) $24.63 \%$ C) $18.7 \%$ D) $19.7 \%$ A) $15.1 \%$ B) $24.63 \%$ C) $18.7 \%$ D) $19.7 \%$

$\begin{array}{|l|c|c|} \hline \text { Asset } & \begin{array}{c} \text { Expected return } \\ (\mathrm{E}(\mathrm{R}) \boldsymbol{)} \end{array} & \begin{array}{c} \text { Standard deviation } \\ \text { (ธ) } \end{array} \\ \hline \mathrm{A} & 10 \% & 9 \% \\ \hline \mathrm{B} & 12 \% & 8 \% \\ \hline \mathrm{C} & 15 \% & 12 \% \\ \hline \mathrm{D} & 13 \% & 11 \% \\ \hline \end{array}$ -Which of the four investments has the highest coefficient of variation?

A) $\text { Asset } A$ B) $\text { Asset } B$ C) $\text { Asset } C$ D) $\text { Asset } D$ A) $\text { Asset } A$ B) $\text { Asset } B$ C) $\text { Asset } C$ D) $\text { Asset } D$

Exam 1: The Investment Decision

$\begin{array}{|c|c|c|}\hline \text { Asset } & \begin{array}{c}\text { Price at } \\\text { start of } \\\text { period (\$) }\end{array} & \begin{array}{c}\text { Price at } \\\text { end of } \\\text { period (\$) }\end{array} \\\hline \text { A } & \$ 3.25 & \$ 4.25 \\\hline \text { B } & \$ 4.12 & \$ 3.85 \\\hline & & \\\hline\end{array}$ -Given the prices for A and B at the start and end of the period,if an investor holds 1000 shares in asset A and 5000 in asset B,what is her value-weighted return on the portfolio?

(Multiple Choice)

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Question 21

$\begin{array}{|l|r|r|r}\hline \text { Asset } & \text { Number of shares } & \text { Initial price (\$) } & \text { End price (\$) } \\\hline \text { A } & 2000 & 6.00 & 6.10 \\\hline \text { B } & 5000 & 3.00 & 2.25 \\\hline \text { C } & 3000 & 12.00 & 11.50 \\\hline \text { D } & 12000 & 8.50 & 8.85 \\\hline\end{array}$ -An investor purchased the investment above.What is the value-weighted return on the portfolio?

(Multiple Choice)

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Question 22

Asset Expected return (() Standard deviation (ธ) 10\% 9\% 12\% 8\% 15\% 12\% 13\% 11\% -Given no other information other than the expected returns and risk,which asset would a risk-averse investor prefer?

(Multiple Choice)

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Question 23

Investment returns are received from two sources;interest and dividends.

(True/False)

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Question 24

Year Return Year 1 7\% Year 2 17\% Year 3 -2.4\% Year 4 2\% -The value of an investment at the end of each of four years is shown above.What is the geometric cumulative return over the four years?

(Multiple Choice)

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Question 25

Generally speaking,equity is the least risky of the asset classes.

(True/False)

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Question 26

Asset Expected return (() Standard deviation (ธ) 10\% 9\% 12\% 8\% 15\% 12\% 13\% 11\% -Which of the four investments has the highest coefficient of variation?

(Multiple Choice)

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Question 27

If two normal distributions are multiplied,the outcome distribution is normal.

(True/False)

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Question 28

The returns for two assets,A and B,are 5% and 8% respectively.If an investor holds 25% of her wealth in asset A,what is the continuously compounded return of a value-weighted portfolio comprising assets A and B?

(Multiple Choice)

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Question 29

Which of the following statements is true when comparing the log normal distribution to the normal distribution?

(Multiple Choice)

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Question 30

A continuously compounded return is always less than the equivalent discrete return.

(True/False)

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Question 31

Investment assets differ in risk because of:

(Multiple Choice)

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Question 32

An investment was purchased for $2985.After seven months this investment was worth $3245.What is the continuously compounded return on the investment over the seven-month period?

(Multiple Choice)

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Question 33

Which of the following best describes the changes in asset class composition that occur with increased age,according to the investor life cycle theory of Seigal (1991)?

(Multiple Choice)

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Question 34

The price at the start of the period for asset A is $5 and for asset B is $6.At the end of the period,asset A has fallen to $4 and asset B has risen to $6.50.Calculate the continuously compounded return on a price-weighted portfolio consisting of shares A and B.

(Multiple Choice)

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Question 35

Which of the following is true regarding the investor's life cycle of Seigal (1991)?

(Multiple Choice)

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Question 36

Under a normal distribution,what proportion of observations fall within two standard deviations of the mean?

(Multiple Choice)

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Question 37

Steps involved in the asset allocation decision are considered to be:

(Multiple Choice)

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Question 38

The use of discrete returns ignores compounding.

(True/False)

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Question 39

The lognormal distribution is symmetrical.

(True/False)

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Question 40

Asset Expected return (() Standard deviation (ธ) 10\% 9\% 12\% 8\% 15\% 12\% 13\% 11\% -Given no other information other than the expected returns and risk,which asset would a risk-averse investor prefer?

Investment returns are received from two sources;interest and dividends.

Year Return Year 1 7\% Year 2 17\% Year 3 -2.4\% Year 4 2\% -The value of an investment at the end of each of four years is shown above.What is the geometric cumulative return over the four years?

Generally speaking,equity is the least risky of the asset classes.

Asset Expected return (() Standard deviation (ธ) 10\% 9\% 12\% 8\% 15\% 12\% 13\% 11\% -Which of the four investments has the highest coefficient of variation?

If two normal distributions are multiplied,the outcome distribution is normal.

The returns for two assets,A and B,are 5% and 8% respectively.If an investor holds 25% of her wealth in asset A,what is the continuously compounded return of a value-weighted portfolio comprising assets A and B?

Which of the following statements is true when comparing the log normal distribution to the normal distribution?

A continuously compounded return is always less than the equivalent discrete return.

Investment assets differ in risk because of:

An investment was purchased for $2985.After seven months this investment was worth $3245.What is the continuously compounded return on the investment over the seven-month period?

Which of the following best describes the changes in asset class composition that occur with increased age,according to the investor life cycle theory of Seigal (1991)?

The price at the start of the period for asset A is $5 and for asset B is $6.At the end of the period,asset A has fallen to $4 and asset B has risen to $6.50.Calculate the continuously compounded return on a price-weighted portfolio consisting of shares A and B.

Which of the following is true regarding the investor's life cycle of Seigal (1991)?

Under a normal distribution,what proportion of observations fall within two standard deviations of the mean?

Steps involved in the asset allocation decision are considered to be:

The use of discrete returns ignores compounding.

The lognormal distribution is symmetrical.

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Financial Management: Derivative Instruments and Information Sources

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Investor Preferences and Portfolio Concepts

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Concepts and Applications of Market Efficiency

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Advanced Issues in Options

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