Question 1

The variance of expected returns is equal to the square root of the expected returns.

Accepted Answer

A) True 
 B)False

Question 2

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You have concluded that next year the following relationships are possible:
  
-Refer to Exhibit 1.4. What is your expected rate of return [E(Ri)] for next year?

Accepted Answer

A)  4.25% 
B)  6.00% 
C)  6.25% 
D)  7.75% 
E)  8.00% 
A)  4.25% 
B)  6.00% 
C)  6.25% 
D)  7.75% 
E)  8.00%

Question 3

In the phrase "nominal risk-free rate," nominal means

Accepted Answer

A)  computed. 
B)  historical. 
C)  market. 
D)  average. 
E)  risk adverse. 
A)  computed. 
B)  historical. 
C)  market. 
D)  average. 
E)  risk adverse.

Question 4

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The annual rates of return of Stock Z for the last four years are 0.10, 0.15, -0.05, and 0.20, respectively.
-Refer to Exhibit 1.8. Compute the coefficient of variation for Stock Z.

Accepted Answer

A)  0.837 
B)  0.935 
C)  1.070 
D)  1.145 
E)  1.281 
A)  0.837 
B)  0.935 
C)  1.070 
D)  1.145 
E)  1.281

Question 5

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that during the past year the consumer price index increased by 1.5 percent and the securities listed below returned the following nominal rates of return.
  
-Refer to Exhibit 1.5. What are the real rates of return for each of these securities?

Accepted Answer

A)  4.29% and 6.32% 
B)  1.23% and 4.29% 
C)  3.20% and 6.32% 
D)  1.23% and 3.20% 
E)  3.75% and 5.75% 
A)  4.29% and 6.32% 
B)  1.23% and 4.29% 
C)  3.20% and 6.32% 
D)  1.23% and 3.20% 
E)  3.75% and 5.75%

Question 6

Measures of risk for an investment include

Accepted Answer

A)  variance of returns and business risk. 
B)  coefficient of variation of returns and financial risk. 
C)  business risk and financial risk. 
D)  variance of returns and coefficient of variation of returns. 
E)  variance of returns and economic risk. 
A)  variance of returns and business risk. 
B)  coefficient of variation of returns and financial risk. 
C)  business risk and financial risk. 
D)  variance of returns and coefficient of variation of returns. 
E)  variance of returns and economic risk.

Question 7

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that during the past year the consumer price index increased by 1.5 percent and the securities listed below returned the following nominal rates of return.
  
-Refer to Exhibit 1.5. If next year the real rates all rise by 10 percent while inflation climbs from 1.5 percent to 2.5 percent, what will be the nominal rate of return on each security?

Accepted Answer

A)  1.24% and 1.52% 
B)  1.35% and 3.52% 
C)  3.89% and 6.11% 
D)  3.52% and 3.89% 
E)  1.17% and 6.11% 
A)  1.24% and 1.52% 
B)  1.35% and 3.52% 
C)  3.89% and 6.11% 
D)  3.52% and 3.89% 
E)  1.17% and 6.11%

Question 8

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Suppose you bought a GM corporate bond on January 25, 2001 for $750 and solid it on January 25, 2004 for $650.00.
-Refer to Exhibit 1.2. What was your annual holding period yield?

Accepted Answer

A)  -0.0466 
B)  -0.1333 
C)  0.0333 
D)  0.3534 
E)  0.8667 
A)  -0.0466 
B)  -0.1333 
C)  0.0333 
D)  0.3534 
E)  0.8667

Question 9

The rate of exchange between certain future dollars and certain current dollars is known as the pure rate of interest.

Accepted Answer

A) True 
 B)False

Question 10

The holding period return (HPR) is equal to the holding period yield (HPY) stated as a percentage.

Accepted Answer

A) True 
 B)False

Question 11

The nominal risk-free rate of interest is a function of the

Accepted Answer

A)  real risk-free rate and the investment's variance. 
B)  prime rate and the rate of inflation. 
C)  T-bill rate plus the inflation rate. 
D)  tax free rate plus the rate of inflation. 
E)  real risk-free rate and the rate of inflation. 
A)  real risk-free rate and the investment's variance. 
B)  prime rate and the rate of inflation. 
C)  T-bill rate plus the inflation rate. 
D)  tax free rate plus the rate of inflation. 
E)  real risk-free rate and the rate of inflation.

Question 12

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information
Nominal annual return on U.S. government T-bills for year 2018 = 3.5%
Nominal annual return on U.S. government long-term bonds for year 2018 = 4.75%
Nominal annual return on U.S. large-cap stocks for year 2018= 8.75%
Consumer price index January 1, 2018 = 165
Consumer price index December 31, 2018 = 169
-Refer to Exhibit 1.10. Calculate the annual real rate of return for U.S. T-bills.

Accepted Answer

A)  2.26% 
B)  1.81% 
C)  -0.5% 
D)  1.05% 
E)  0% 
A)  2.26% 
B)  1.81% 
C)  -0.5% 
D)  1.05% 
E)  0%

The variance of expected returns is equal to the square root of the expected returns.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) You have concluded that next year the following relationships are possible: -Refer to Exhibit 1.4. What is your expected rate of return [E(R_i)] for next year?

In the phrase "nominal risk-free rate," nominal means

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The annual rates of return of Stock Z for the last four years are 0.10, 0.15, -0.05, and 0.20, respectively. -Refer to Exhibit 1.8. Compute the coefficient of variation for Stock Z.

Measures of risk for an investment include

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Suppose you bought a GM corporate bond on January 25, 2001 for $750 and solid it on January 25, 2004 for $650.00. -Refer to Exhibit 1.2. What was your annual holding period yield?

The rate of exchange between certain future dollars and certain current dollars is known as the pure rate of interest.

The holding period return (HPR) is equal to the holding period yield (HPY) stated as a percentage.

The nominal risk-free rate of interest is a function of the

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

Exam 1: The Investment Setting

The variance of expected returns is equal to the square root of the expected returns.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) You have concluded that next year the following relationships are possible: -Refer to Exhibit 1.4. What is your expected rate of return [E(Ri)] for next year?

In the phrase "nominal risk-free rate," nominal means

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The annual rates of return of Stock Z for the last four years are 0.10, 0.15, -0.05, and 0.20, respectively. -Refer to Exhibit 1.8. Compute the coefficient of variation for Stock Z.

Measures of risk for an investment include

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Suppose you bought a GM corporate bond on January 25, 2001 for $750 and solid it on January 25, 2004 for $650.00. -Refer to Exhibit 1.2. What was your annual holding period yield?

The rate of exchange between certain future dollars and certain current dollars is known as the pure rate of interest.

The holding period return (HPR) is equal to the holding period yield (HPY) stated as a percentage.

The nominal risk-free rate of interest is a function of the

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) You have concluded that next year the following relationships are possible: -Refer to Exhibit 1.4. What is your expected rate of return [E(R_i)] for next year?