Question 1

Which type of investment has historically had the lowest volatility?

Accepted Answer

Investments in Treas

Question 2

If the Bank of Canada were to change from an expansionary to contractionary monetary policy,this would be an example of:

Accepted Answer

A) unsystematic risk. 
B) systematic risk. 
C) independent risk. 
D) diversification risk. 
E) unwanted risk. 
A) unsystematic risk. 
B) systematic risk. 
C) independent risk. 
D) diversification risk. 
E) unwanted risk.

Question 3

Which of the following investments offered the lowest overall return over the past fifty years?

Accepted Answer

A) S&P/TSX Composite Index 
B) Treasury bills 
C) S&P 500 
D) corporate bonds 
E) long-term Government of Canada bonds 
A) S&P/TSX Composite Index 
B) Treasury bills 
C) S&P 500 
D) corporate bonds 
E) long-term Government of Canada bonds

Question 4

Use the table for the question(s)below.
Consider the following realized annual returns:
  
-The average annual return over the period 1926-2009 for the S&P 500 is 11.7%,and the standard deviation of returns is 20.5%.Based on these numbers,what is a 95% confidence interval for 2010 returns?

Accepted Answer

A) 1.5%,,22.0% 
B) -8.8%,32.2% 
C) -29.3%,52.7% 
D) -29.3%,73.2% 
E) -14.4%,26.2% 
A) 1.5%,,22.0% 
B) -8.8%,32.2% 
C) -29.3%,52.7% 
D) -29.3%,73.2% 
E) -14.4%,26.2%

Question 5

IGM Realty had a price of $30,$30,$35,$33,and $25 at the end of the last five quarters.If IGM pays a dividend of $2 at the end of each quarter,what is the annual realized return on IGM?

Accepted Answer

A) 8.61% 
B) 7.6% 
C) 7.10% 
D) 8.09% 
E) 8.24% 
A) 8.61% 
B) 7.6% 
C) 7.10% 
D) 8.09% 
E) 8.24%

Question 6

What are the two components of realized return from a stock investment?

Accepted Answer

The total realized return earn

Question 7

Amazon.com stock prices gave a realized return of 5%,-5%,10%,and -10% over four successive quarters.What is the annual realized return for Amazon.com for the year?

Accepted Answer

A) -1.25% 
B) 2.50% 
C) 0.00% 
D) 1.25% 
E) 1.00% 
A) -1.25% 
B) 2.50% 
C) 0.00% 
D) 1.25% 
E) 1.00%

Question 8

Use the table for the question(s)below.
Consider the following average annual returns:
  
-What is the risk premium for Treasury bills?

Accepted Answer

A) 0% 
B) -8.4% 
C) -2.7% 
D) -1.4% 
E) -18.4% 
A) 0% 
B) -8.4% 
C) -2.7% 
D) -1.4% 
E) -18.4%

Question 9

Many former employees at Enron,an energy trading and supply company,had a large part of their portfolio invested in Enron stock.These employees were bearing a high degree of ________ risk.

Accepted Answer

A) unsystematic 
B) systematic 
C) market specific 
D) non-diversifiable 
E) common 
A) unsystematic 
B) systematic 
C) market specific 
D) non-diversifiable 
E) common

Question 10

Suppose you invested $98 in the Ishares High Yield Fund (HYG)a month ago.It paid a dividend of $0.47 today and then you sold it for $99.What was your dividend yield and capital gains yield on the investment?

Accepted Answer

A) 0.45%,1.09% 
B) 0.48%,1.02% 
C) 0.48%,1.08% 
D) 1.02%,1.12% 
E) 0.75%,0.98% 
A) 0.45%,1.09% 
B) 0.48%,1.02% 
C) 0.48%,1.08% 
D) 1.02%,1.12% 
E) 0.75%,0.98%

Question 11

The risk premium of a security is determined by its ________ risk and does not depend on its ________ risk.

Accepted Answer

A) systematic,undiversifiable 
B) systematic,unsystematic 
C) diversifiable,diversifiable 
D) diversifiable,unsystematic 
E) unsystematic,diversifiable 
A) systematic,undiversifiable 
B) systematic,unsystematic 
C) diversifiable,diversifiable 
D) diversifiable,unsystematic 
E) unsystematic,diversifiable

Question 12

Is volatility a reasonable measure of risk when evaluating large portfolios?

Accepted Answer

Yes,volatility is a reasonable

Question 13

Use the table for the question(s)below.
Consider the following price and dividend data for Ford Motor Company:
  
-Assume that you purchased Ford Motor Company stock at the closing price on December 31,2004 and sold it after the dividend had been paid at the closing price on January 26,2005.Your total return rate (yield)for this period is closest to:

Accepted Answer

A) 0.70% 
B) -8.13% 
C) -8.80% 
D) 0.75% 
E) 1.25% 
A) 0.70% 
B) -8.13% 
C) -8.80% 
D) 0.75% 
E) 1.25%

Question 14

Your investment over one year yielded a capital gains yield of 5% and no dividend yield.If the sale price was $119 per share,what was the cost of the investment?

Accepted Answer

A) $126.25 
B) $111.67 
C) $113.33 
D) $117.25 
E) $115.57 
A) $126.25 
B) $111.67 
C) $113.33 
D) $117.25 
E) $115.57

Question 15

There is a clear link between the volatility of returns for individual stocks and and the returns for individual stocks.

Accepted Answer

A) True 
 B)False

Question 16

Which type of investment has historically had the highest volatility?

Accepted Answer

Investments in small

Question 17

Suppose that a stock gave a realized return of 20% over a two-year time period and a 10% return over the third year.The geometric average annual return is:

Accepted Answer

A) 9.70% 
B) 11.20% 
C) 14.96% 
D) 15.00% 
E) 16.55% 
A) 9.70% 
B) 11.20% 
C) 14.96% 
D) 15.00% 
E) 16.55%

Question 18

Your investment over one year had a realized return of 7% and a dividend of $1.25.If the sale price was $36 per share,what was the cost of the investment?

Accepted Answer

A) $32.15 
B) $32.78 
C) $33.64 
D) $34.81 
E) $34.90 
A) $32.15 
B) $32.78 
C) $33.64 
D) $34.81 
E) $34.90

Question 19

Independent risk is more closely related to:

Accepted Answer

A) unsystematic risk. 
B) systematic risk. 
C) common risk. 
D) diversification risk. 
E) unwanted risk. 
A) unsystematic risk. 
B) systematic risk. 
C) common risk. 
D) diversification risk. 
E) unwanted risk.

Question 20

The Ishares Bond Index fund (TLT)has a mean and annual standard deviation of returns of 7% and 10%,respectively.What is the 66% confidence interval for the returns on TLT?

Accepted Answer

A) -5%,10% 
B) 7%,10% 
C) -3%,17% 
D) -10%,10% 
E) -5%,15% 
A) -5%,10% 
B) 7%,10% 
C) -3%,17% 
D) -10%,10% 
E) -5%,15%

Exam 10: Risk and Return in Capital Markets

Which type of investment has historically had the lowest volatility?

If the Bank of Canada were to change from an expansionary to contractionary monetary policy,this would be an example of:

Which of the following investments offered the lowest overall return over the past fifty years?

Use the table for the question(s)below. Consider the following realized annual returns: -The average annual return over the period 1926-2009 for the S&P 500 is 11.7%,and the standard deviation of returns is 20.5%.Based on these numbers,what is a 95% confidence interval for 2010 returns?

IGM Realty had a price of $30,$30,$35,$33,and $25 at the end of the last five quarters.If IGM pays a dividend of $2 at the end of each quarter,what is the annual realized return on IGM?

What are the two components of realized return from a stock investment?

Amazon.com stock prices gave a realized return of 5%,-5%,10%,and -10% over four successive quarters.What is the annual realized return for Amazon.com for the year?

Use the table for the question(s)below. Consider the following average annual returns: -What is the risk premium for Treasury bills?

Many former employees at Enron,an energy trading and supply company,had a large part of their portfolio invested in Enron stock.These employees were bearing a high degree of ________ risk.

Suppose you invested $98 in the Ishares High Yield Fund (HYG)a month ago.It paid a dividend of $0.47 today and then you sold it for $99.What was your dividend yield and capital gains yield on the investment?

The risk premium of a security is determined by its ________ risk and does not depend on its ________ risk.

Is volatility a reasonable measure of risk when evaluating large portfolios?

Your investment over one year yielded a capital gains yield of 5% and no dividend yield.If the sale price was $119 per share,what was the cost of the investment?

There is a clear link between the volatility of returns for individual stocks and and the returns for individual stocks.

Which type of investment has historically had the highest volatility?

Suppose that a stock gave a realized return of 20% over a two-year time period and a 10% return over the third year.The geometric average annual return is:

Your investment over one year had a realized return of 7% and a dividend of $1.25.If the sale price was $36 per share,what was the cost of the investment?

Independent risk is more closely related to:

The Ishares Bond Index fund (TLT)has a mean and annual standard deviation of returns of 7% and 10%,respectively.What is the 66% confidence interval for the returns on TLT?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

Filters

The risk premium of a security is determined by its risk and does not depend on its risk.