uestion 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
If the management team of a company decides to increase the dividend payment for the current year
The stock price should decline because the present value will be lower
The discount rate will change because it will change the risk of the cash flows.
The stock price should rise because the present value will be higher
The stock price should not be impacted because nothing fundamental about the company has been changed, and as there will be less funds generated to pay out future dividends.
Feedback
Question 4
Question text
Feedback
Question 5
Question text
Feedback
Question 6
Question text
Feedback
Question 7
Question text
Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $51. Sally would be best served to:
use the bid-ask spread to her advantage.
buy using a market order.
sell first using a limit order and then buy using a market order
buy using a limit order.
Feedback
Question 8
Question text
Why is it expected to be using higher discount rates to discount stock dividend payments compared to the discount rates used to discount bond coupon payments?
Because the cash flows resulting from owning a stock are typically more risky than the cash flows resulting from owning a bond.
Because dividends are paid more frequently than coupon payments.
Because stocks typically pay higher payments than bonds.
Because companies usually use more equity than debt.
Feedback
Question 9
Question text
Stock valuation model dynamics make clear that lower dividend growth rates lead to
lower valuations.
higher discount rates.
lower discount rates.
higher valuations.
Feedback
Question 10
Question text
Stock valuation model dynamics make clear that higher discount rates lead to
lower growth rates.
higher valuations.
higher growth rates.
lower valuations.
Feedback
Question 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 1
Question text
Which of the following statements is correct?
Bonds and stocks have a very high correlation because they are both financial assets.
A single stock has a lot of diversifiable risk.
None of these statements are correct.
A single stock has more market risk than a diversified portfolio of stocks.
Feedback
Question 2
Question text
This is defined as the volatility of an investment, which includes firm specific risk as well as market risk.
total risk
diversifiable risk
market risk
standard deviation
Feedback
Question 3
Question text
What is the main reason for calculating averages of past returns on stocks?
We think they will be useful in estimating future expected return.
We think they will be useful in estimating the past risk of the stock’s returns.
We think they will be useful in estimating the current risk of the stock’s returns.
We think they will be useful in estimating the future risk of the stock’s returns.
Feedback
Question 4
Question text
Feedback
Question 5
Question text
Which of these statements is true?
When people purchase a stock, they know exactly what their dollar and percent return are going to be.
Many people purchase stocks as they find comfort in the certainty for this safe form of investing.
When people purchase a stock, they do not know what their return is going to be - either short term or in the long run.
When people purchase a stock, they know the short-term return, but not the long term return.
Feedback
Question 6
Question text
Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 13 percent and risk of 17 percent. The expected return and risk of portfolio Yellow are 15 percent and 19 percent, and for the Purple portfolio are 12 percent and 18 percent.
Portfolio Blue dominates Portfolio Purple
Portfolio Purple dominates Portfolio Yellow
Portfolio Blue dominates Portfolio Yellow
Portfolio Purple dominates Portfolio Blue
Feedback
Question 7
Question text
Feedback
Question 8
Question text
This is defined as the portion of total risk that is attributable to firm (or industry) factors and can be reduced through diversification.
firm specific risk
market risk
modern portfolio risk
total risk
Feedback
Question 9
Question text
Jane Adams invests all her money in the stock of one firm. Which of the following will likely be true?
Her return will have more volatility than the return in the overall stock market.
There is no relationship between her return and the return in the overall stock market.
Her return will have the same volatility as the return in the overall stock market.
Her return will have less volatility than the return in the overall stock market.
Feedback
Question 10
Question text
Assume a risk-averse investor holds a portfolio of bonds, because bonds are known to be less risky than stocks. Adding some stocks to the existing bond portfolio would most likely
increase the risk of the portfolio because stocks are more risky than bonds, and also increase the return of the portfolio.
reduce the risk of the portfolio even though stocks are more risky than bonds.
reduce the return of the portfolio.
increase the risk of the portfolio because stocks are more risky than bonds, without impacting the return of the portfolio.
Feedback
Question 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 5
Question text
Feedback
Question 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 5
Question text
Feedback
Question 1
Question text
Feedback
Question 2
Question text
Why is it expected to be using higher discount rates to discount stock dividend payments compared to the discount rates used to discount bond coupon payments?
Because companies usually use more equity than debt.
Because dividends are paid more frequently than coupon payments.
Because the cash flows resulting from owning a stock are typically more risky than the cash flows resulting from owning a bond.
Because stocks typically pay higher payments than bonds.
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 5
Question text
Stock valuation model dynamics make clear that higher dividend growth rates lead to
higher discount rates.
lower valuations.
higher valuations.
lower discount rates.
Feedback
Question 6
Question text
Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $51. Sally would be best served to:
use the bid-ask spread to her advantage.
buy using a market order.
buy using a limit order.
sell first using a limit order and then buy using a market order
Feedback
Question 7
Question text
If the management team of a company decides to increase the dividend payment for the current year
The stock price should not be impacted because nothing fundamental about the company has been changed, and as there will be less funds generated to pay out future dividends.
The discount rate will change because it will change the risk of the cash flows.
The stock price should decline because the present value will be lower
The stock price should rise because the present value will be higher
Feedback
Question 8
Question text
Stock valuation model dynamics make clear that lower discount rates lead to
lower growth rates.
lower valuations.
higher valuations.
higher growth rates.
Feedback
Question 9
Question text
Stock valuation model dynamics make clear that higher discount rates lead to
higher growth rates.
lower growth rates.
lower valuations.
higher valuations.
Feedback
Question 10
Question text
Feedback
Question 8
Question text
Feedback
Question 9
Question text
Feedback
Question 3
Question text
Feedback
Question 1
Question text
Feedback
Question 2
Question text
What is the main reason for calculating standard deviation of past returns on a stock?
We think it will be useful in estimating the future expected return.
We think it will be useful in estimating the past risk of the stock’s returns.
We think it will be useful in estimating the past expected return.
We think it will be useful in estimating the future risk of the stock’s returns.
Feedback
Question 3
Question text
Feedback
Question 4
Question text
To find the percentage return of an investment,
multiply the dollar return by the investment's value at the beginning of the period.
multiply the dollar return by the investment's value at the end of the period.
divide the dollar return by the investment's value at the beginning of the period.
divide the dollar return by the investment's value at the end of the period.
Feedback
Question 5
Question text
Feedback
Question 6
Question text
Diversification works better when
The difference in expected returns is small.
The difference in expected returns is high.
Stock returns are less correlated with each other.
Stock returns are more correlated with each other.
Feedback
Question 7
Question text
Feedback
Question 8
Question text
Feedback
Question 9
Question text
Given this data, which of the following is most preferable if an investor can only select one pair of companies?
Feedback
Question 10
Question text
Which of the following statements is correct?
A single stock has a lot of diversifiable risk.
Bonds and stocks have a very high correlation because they are both financial assets.
None of these statements are correct.
A single stock has more market risk than a diversified portfolio of stocks.
Feedback
Question 1
Question text
Sally wants to invest in only two stocks. Which pair of stocks should Sally select, provided they all offer similar returns?
Stocks C and D, which move in opposite directions at the same time.
Stocks A and B, which move downward at the same time.
Stocks G and H, which move randomly at the same time.
Stocks E and F, which move upward at the same time.
Feedback
Question 2
Question text
Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 13 percent and risk of 17 percent. The expected return and risk of portfolio Yellow are 15 percent and 19 percent, and for the Purple portfolio are 12 percent and 18 percent.
Portfolio Purple dominates Portfolio Yellow
Portfolio Purple dominates Portfolio Blue
Portfolio Blue dominates Portfolio Purple
Portfolio Blue dominates Portfolio Yellow
Feedback
Question 3
Question text
Which of these statements is true?
When people purchase a stock, they do not know what their return is going to be - either short term or in the long run.
When people purchase a stock, they know exactly what their dollar and percent return are going to be.
When people purchase a stock, they know the short-term return, but not the long term return.
Many people purchase stocks as they find comfort in the certainty for this safe form of investing.
Feedback
Question 4
Question text
Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 8 percent and standard deviation of 10 percent. The average return and standard deviation of Idol Staff are 10 percent and 15 percent; and of Poker-R-Us are 6 percent and 20 percent.
Poker-R-Us, Idol Staff, Rail Haul
Idol Staff, Rail Haul, Poker-R-Us
Rail Haul, Poker-R-Us, Idol Staff
Idol Staff, Poker-R-Us, Rail Haul
Feedback
Question 5
Question text
Feedback
Question 6
Question text
Feedback
Question 7
Question text
Jane Adams invests all her money in the stock of one firm. Which of the following will likely be true?
There is no relationship between her return and the return in the overall stock market.
Her return will have less volatility than the return in the overall stock market.
Her return will have more volatility than the return in the overall stock market.
Her return will have the same volatility as the return in the overall stock market.
Feedback
Question 8
Question text
This is defined as the portion of total risk that is attributable to firm (or industry) factors and can be reduced through diversification.
total risk
market risk
modern portfolio risk
firm specific risk
Feedback
Question 9
Question text
Feedback
Question 10
Question text
Feedback
Question 1
Question text
This is a measurement of the co-movement between two variables that ranges between -1 and +1.
total risk
correlation
coefficient of variation
standard deviation
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Given this data, which of the following is most preferable if an investor can only select one pair of companies?
Feedback
Question 5
Question text
Which of the following are investor diversification problems?
Investors seem to prefer local firms thereby limiting diversification opportunities.
Many households hold relatively few individual stocks—the median is three.
Many employees hold mostly their employer's stocks as investments.
All of these are investor diversification problems.
Feedback
Question 6
Question text
Which statement is true?
The larger the standard deviation, the higher the total risk.
The larger the standard deviation, the more portfolio risk.
The larger the standard deviation, the lower the total risk.
The standard deviation is not an indication of total risk.
Feedback
Question 7
Question text
Feedback
Question 8
Question text
Assume a risk-averse investor holds a portfolio of bonds, because bonds are known to be less risky than stocks. Adding some stocks to the existing bond portfolio would most likely
reduce the return of the portfolio.
increase the risk of the portfolio because stocks are more risky than bonds, without impacting the return of the portfolio.
increase the risk of the portfolio because stocks are more risky than bonds, and also increase the return of the portfolio.
reduce the risk of the portfolio even though stocks are more risky than bonds.
Feedback
Question 9
Question text
Jane Adams invests all her money in the stock of one firm. Which of the following will likely be true?
Her return will have less volatility than the return in the overall stock market.
Her return will have more volatility than the return in the overall stock market.
There is no relationship between her return and the return in the overall stock market.
Her return will have the same volatility as the return in the overall stock market.
Feedback
Question 10
Question text
Feedback
Question 1
Question text
Feedback
Question 2
Question text
Diversification works better when
Stock returns are less correlated with each other.
The difference in expected returns is high.
Stock returns are more correlated with each other.
The difference in expected returns is small.
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Interest rates, inflation and economic growth are economic factors that are examples of ______________________.
Firm-specific risks that can be diversified away
Market risk
None of these statements are correct
External factors that are neither firm specific risk nor market risk
Feedback
Question 5
Question text
Assume a risk-averse investor holds a portfolio of bonds, because bonds are known to be less risky than stocks. Adding some stocks to the existing bond portfolio would most likely
reduce the return of the portfolio.
reduce the risk of the portfolio even though stocks are more risky than bonds.
increase the risk of the portfolio because stocks are more risky than bonds, without impacting the return of the portfolio.
increase the risk of the portfolio because stocks are more risky than bonds, and also increase the return of the portfolio.
Feedback
Question 6
Question text
Given this data, which of the following is most preferable if an investor can only select one pair of companies?
Feedback
Question 7
Question text
Sally wants to invest in only two stocks. Which pair of stocks should Sally select, provided they all offer similar returns?
Stocks G and H, which move randomly at the same time.
Stocks E and F, which move upward at the same time.
Stocks C and D, which move in opposite directions at the same time.
Stocks A and B, which move downward at the same time.
Feedback
Question 8
Question text
Feedback
Question 9
Question text
To find the percentage return of an investment,
multiply the dollar return by the investment's value at the end of the period.
divide the dollar return by the investment's value at the end of the period.
multiply the dollar return by the investment's value at the beginning of the period.
divide the dollar return by the investment's value at the beginning of the period.
Feedback
Question 10
Question text
What is the main reason for calculating averages of past returns on stocks?
We think they will be useful in estimating the current risk of the stock’s returns.
We think they will be useful in estimating the past risk of the stock’s returns.
We think they will be useful in estimating the future risk of the stock’s returns.
We think they will be useful in estimating future expected return.
Feedback
uestion 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
This is defined as the volatility of an investment, which includes firm specific risk as well as market risk.
total risk
diversifiable risk
market risk
standard deviation
Feedback
Question 4
Question text
Which of the following are investor diversification problems?
Investors seem to prefer local firms thereby limiting diversification opportunities.
Many households hold relatively few individual stocks—the median is three.
All of these are investor diversification problems.
Many employees hold mostly their employer's stocks as investments.
Feedback
Question 5
Question text
Feedback
Question 6
Question text
Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 8 percent and standard deviation of 10 percent. The average return and standard deviation of Idol Staff are 10 percent and 15 percent; and of Poker-R-Us are 6 percent and 20 percent.
Poker-R-Us, Idol Staff, Rail Haul
Idol Staff, Rail Haul, Poker-R-Us
Idol Staff, Poker-R-Us, Rail Haul
Rail Haul, Poker-R-Us, Idol Staff
Feedback
Question 7
Question text
Feedback
Question 8
Question text
Sally wants to invest in only two stocks. Which pair of stocks should Sally select, provided they all offer similar returns?
Stocks C and D, which move in opposite directions at the same time.
Stocks E and F, which move upward at the same time.
Stocks G and H, which move randomly at the same time.
Stocks A and B, which move downward at the same time.
Feedback
Question 9
Question text
Feedback
Question 10
Question text
Feedback
Question 1
Question text
This is another term for market risk.
firm specific risk
Non-diversifiable risk
modern portfolio risk
total risk
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 5
Question text
What is the main reason for calculating standard deviation of past returns on a stock?
We think it will be useful in estimating the future expected return.
We think it will be useful in estimating the future risk of the stock’s returns.
We think it will be useful in estimating the past risk of the stock’s returns.
We think it will be useful in estimating the past expected return.
Feedback
Question 6
Question text
What is the best definition of efficient portfolio?
Efficient portfolio is a portfolio that dominates all other portfolios.
Efficient portfolio is a portfolio with the smallest standard deviation of returns.
Efficient portfolio is a portfolio with the highest expected return.
Efficient portfolio is a portfolio that is not dominated by any other portfolio.
Feedback
Question 7
Question text
To find the percentage return of an investment,
divide the dollar return by the investment's value at the beginning of the period.
multiply the dollar return by the investment's value at the end of the period.
divide the dollar return by the investment's value at the end of the period.
multiply the dollar return by the investment's value at the beginning of the period.
Feedback
Question 8
Question text
Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 13 percent and risk of 17 percent. The expected return and risk of portfolio Yellow are 15 percent and 19 percent, and for the Purple portfolio are 12 percent and 18 percent.
Portfolio Purple dominates Portfolio Blue
Portfolio Blue dominates Portfolio Purple
Portfolio Purple dominates Portfolio Yellow
Portfolio Blue dominates Portfolio Yellow
Feedback
Question 9
Question text
Stock A has a required return of 19%. Stock B has a required return of 26%. Assume a risk-free rate of 4.75%. Which of the following is most likely a correct statement about the two stocks?
An investor is most likely to consider stock B to be riskier than stock A.
An investor is most likely to consider stock A and stock B to have the same risk.
An investor would most likely need more information to decide which of the two stocks is riskier.
An investor is most likely to consider stock A to be riskier than stock B.
Feedback
Question 10
Question text
Feedback
Question 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 5
Question text
Feedback
uestion 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 5
Question text
Feedback
Question 1
Question text
Feedback
Question 2
Question text
Feedback
Question 3
Question text
Feedback
Question 4
Question text
Feedback
Question 5
Question text
Feedback
Comments
Post a Comment