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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, December 5, 2021, 7:05 PM
State	Finished
Completed on	Sunday, December 5, 2021, 7:18 PM
Time taken	12 mins 49 secs
Grade	7.00 out of 10.00 (70%)

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Question 1

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In 2000, the S&P500 Index earned 11% while the T-bill yield was 4.4%. Given this information, which of the following statements is likely correct with respect to the market risk premium?

Select one:

The market risk premium must have been positive.

The market risk premium must have been zero.

The market risk premium must have been negative.

Unable to answer without more information.

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The correct answer is: The market risk premium must have been positive.

Question 2

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Select one:

None of these statements is correct.

This is an example of a market overreaction.

This is an example of a market underreaction.

This is an example of a semi-strong efficient market.

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The correct answer is: This is an example of a market underreaction.

Question 3

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Special rights given to some employees to buy a specific number of shares of the company stock at a fixed price during a specific period of time are known as:

Select one:

executive stock options.

restricted stock.

privately held information.

stock market bubble.

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The correct answer is: executive stock options.

Question 4

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This is the average of the possible returns weighted by the likelihood of those returns occurring.

Select one:

efficient return

expected return

market return

required return

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The correct answer is: expected return

Question 5

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A stock with beta equal to 0.4 would most likely be considered

Select one:

To have a higher systematic risk than the overall stock market.

More risky than the overall stock market.

To have a higher expected return than the overall stock market.

Less risky than the overall stock market.

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The correct answer is: Less risky than the overall stock market.

Question 6

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In theory, this is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate.

Select one:

efficient market

probability distribution

stock market bubble

market portfolio

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The correct answer is: market portfolio

Question 7

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Which of the following is data that includes past stock prices and volume, financial statements, corporate news, analyst opinions, etc.?

Select one:

Privately held information

Public information

Generally accepted accounting principles

Audited financial statements

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The correct answer is: Public information

Question 8

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How might a large market risk premium impact people's desire to buy stocks?

Select one:

It will only impact the share prices.

None of these statements is a correct answer.

Investors with high risk aversion will be more willing to invest in stocks.

Investors with high risk aversion will be less willing to invest in stocks.

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The correct answer is: Investors with high risk aversion will be less willing to invest in stocks.

Question 9

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Investor enthusiasm causes an inflated bull market that drives prices too high, ending in a dramatic collapse in prices is known as:

Select one:

efficient market.

behavior finance.

privately held information.

stock market bubble.

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The correct answer is: stock market bubble.

Question 10

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Which of these refers to something that has not been released to the public, but is known by few individuals, likely company insiders?

Select one:

Insider trading

Privately held information

Audited financial statements

Restricted stock

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The correct answer is: Privately held information

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, December 5, 2021, 7:19 PM
State	Finished
Completed on	Sunday, December 5, 2021, 7:32 PM
Time taken	12 mins 54 secs
Grade	9.00 out of 10.00 (90%)

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Question 1

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Which of the following are the stocks of small companies that are priced below $1 per share?

Select one:

Bargain stocks

Stock market bubble stocks

Penny stocks

Hedge fund stocks

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The correct answer is: Penny stocks

Question 2

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Which of the following is the use of debt to increase an investment position?

Select one:

Financial leverage

Behavioral finance

Stock market bubble

Probability

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The correct answer is: Financial leverage

Question 3

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A stock with beta equal to 2.4 would most likely be considered

Select one:

More risky than the overall stock market.

To have a smaller total risk than the overall stock market.

Less risky than the overall stock market.

To have a smaller expected return than the overall stock market.

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The correct answer is: More risky than the overall stock market.

Question 4

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Which of the below is a measure of the sensitivity of a stock or portfolio to market risk?

Select one:

hedge

beta

behavioral finance

efficient market

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The correct answer is: beta

Question 5

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Whenever a set of stock prices go unnaturally high and subsequently crash down, the market experiences what we call

Select one:

a financial meltdown.

a stock market bubble.

none of these.

an irrational behavior.

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The correct answer is: a stock market bubble.

Question 6

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Assume when plotting stock Z on a security market line diagram the stock would be found above the security market line. What would this position on the diagram imply about stock Z?

Select one:

Stock Z’s beta must be negative.

Stock Z’s position is not plotted correctly because all stocks must be found on the security market line.

Stock Z is overvalued in the market.

Stock Z is undervalued in the market.

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The correct answer is: Stock Z is undervalued in the market.

Question 7

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Which of the following is most correct?

Select one:

None of these statements is correct.

In an efficient market, investors will sell overvalued stock which will drive its price down.

In an efficient market, investors will buy overvalued stock which will drive its price down.

In an efficient market, investors will sell undervalued stock which will drive its price down.

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The correct answer is: In an efficient market, investors will sell overvalued stock which will drive its price down.

Question 8

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Which of the following is a concern regarding beta?

Select one:

A company can alter its risk level which may make the beta estimate obsolete.

Using different market proxies will result in different estimates of beta.

Research indicates that a company's beta does not appear to predict its future return very well.

All of these statements are valid concerns regarding beta.

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The correct answer is: All of these statements are valid concerns regarding beta.

Question 9

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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 a correct statement about the two stocks?

Select one:

We would need to know more information to answer this question.

The stocks have the same risk.

Stock B is riskier.

Stock A is riskier.

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The correct answer is: Stock B is riskier.

Question 10

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Which of the following is a model that includes an equation that relates a stock's required return to an appropriate risk premium?

Select one:

Beta

Behavioral finance

Efficient markets

Asset pricing

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The correct answer is: Asset pricing

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, December 5, 2021, 7:33 PM
State	Finished
Completed on	Sunday, December 5, 2021, 7:44 PM
Time taken	10 mins 59 secs
Points	4.00/4.00
Grade	10.00 out of 10.00 (100%)

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Question 1

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The annual return on the S&P 500 Index was 11.5 percent. The annual T-bill yield during the same period was 4.3 percent. What was the market risk premium during that year?

Select one:

7.9 percent

15.8 percent

7.2 percent

2.7 percent

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The correct answer is: 7.2 percent

Question 2

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A company has a beta of 0.75. If the market return is expected to be 8 percent and the risk-free rate is 3 percent, what is the company's required return?

Select one:

9 percent

3.75 percent

6 percent

6.75 percent

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The correct answer is: 6.75 percent

Question 3

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A manager believes his firm will earn a 12 percent return next year. His firm has a beta of 1.6, the expected return on the market is 11 percent, and the risk-free rate is 3 percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is undervalued or overvalued.

Select one:

25.4 percent, undervalued

15.8 percent, undervalued

15.8 percent, overvalued

25.4 percent, overvalued

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The correct answers are: 15.8 percent, undervalued, 15.8 percent, overvalued

Question 4

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You own $1,000 of City Steel stock that has a beta of 1. You also own $3,000 of Rent-N-Co (beta = 1.5) and $6,000 of Lincoln Corporation (beta = 2). What is the beta of your portfolio?

Select one:

1.75

0.5

4.5

1.5

Feedback

The correct answer is: 1.75

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, December 5, 2021, 7:45 PM
State	Finished
Completed on	Sunday, December 5, 2021, 7:48 PM
Time taken	3 mins 1 sec
Points	4.00/4.00
Grade	10.00 out of 10.00 (100%)

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Question 1

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A company has a beta of 0.75. If the market return is expected to be 8 percent and the risk-free rate is 3 percent, what is the company's required return?

Select one:

9 percent

6 percent

3.75 percent

6.75 percent

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The correct answer is: 6.75 percent

Question 2

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You have a portfolio with a beta of 1.25. What will be the new portfolio beta if you keep 60 percent of your money in the old portfolio and 40 percent in a stock with a beta of 0.8?

Select one:

1.13

1.03

1.07

0.98

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The correct answer is: 1.07

Question 3

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You own $1,000 of City Steel stock that has a beta of 1. You also own $3,000 of Rent-N-Co (beta = 1.5) and $6,000 of Lincoln Corporation (beta = 2). What is the beta of your portfolio?

Select one:

0.5

1.5

4.5

1.75

Feedback

The correct answer is: 1.75

Question 4

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Select one:

25.4 percent, overvalued

25.4 percent, undervalued

15.8 percent, undervalued

15.8 percent, overvalued

Feedback

The correct answers are: 15.8 percent, undervalued, 15.8 percent, overvalued

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, December 5, 2021, 7:49 PM
State	Finished
Completed on	Sunday, December 5, 2021, 8:05 PM
Time taken	16 mins 19 secs
Points	18.00/20.00
Grade	9.00 out of 10.00 (90%)

Top of Form

Question 1

Correct

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Which of the following is the use of debt to increase an investment position?

Select one:

Stock market bubble

Probability

Financial leverage

Behavioral finance

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The correct answer is: Financial leverage

Question 2

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Bond prices are usually quoted

Select one:

In dollars and give the exact amount that the buyer will pay for one bond.

As a percentage of its par value.

As the dollar price of each $1,000 of the par value.

Discounted by the coupon rate.

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The correct answer is: As a percentage of its par value.

Question 3

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IBM has a beta of 1.0 and Apple Computer has a beta of 2.0. Which of the following statements must be correct?

Select one:

None of these statements is correct.

By creating a portfolio consisting of only these two stocks, it is possible to achieve a portfolio beta of less than 1.0.

The market risk premium for Apple must be larger than the market risk premium of IBM.

Apple's expected rate of return must be twice as large as IBM's.

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The correct answer is: None of these statements is correct.

Question 4

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Stock valuation model dynamics make clear that lower dividend growth rates lead to

Select one:

higher discount rates.

lower discount rates.

higher valuations.

lower valuations.

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The correct answer is: lower valuations.

Question 5

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Which of the following will only be executed if the order's price conditions are met?

Select one:

A trade

A spread

A limit order

An unlimited order

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The correct answer is: A limit order

Question 6

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The liquidity premium will be larger if

Select one:

There is typically a lot of trading activity related to the security.

The default risk is lower.

There is typically not much trading activity related to the security.

The default risk is higher.

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The correct answer is: There is typically not much trading activity related to the security.

Question 7

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If the coupon rate equals 7% then a corresponding $1,000 face value bond

Select one:

Will pay regular amounts that will depend on its yield to maturity.

Will pay $70 every six months.

Will yield 7% to a buyer of the bond.

Will pay $35 every six months.

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The correct answer is: Will pay $35 every six months.

Question 8

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Stock valuation model dynamics make clear that lower discount rates lead to

Select one:

lower growth rates.

higher growth rates.

lower valuations.

higher valuations.

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The correct answer is: higher valuations.

Question 9

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Which of the following is a concern regarding beta?

Select one:

Using different market proxies will result in different estimates of beta.

All of these statements are valid concerns regarding beta.

Research indicates that a company's beta does not appear to predict its future return very well.

A company can alter its risk level which may make the beta estimate obsolete.

Feedback

The correct answer is: All of these statements are valid concerns regarding beta.

Question 10

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The real interest rate is:

Select one:

None of these statements is a correct definition.

the rate that a security would pay if the security had no maturity risk.

the rate charged to the corporations with the best credit rating or least amount of default risk.

the rate that a security would pay if no inflation were expected over its holding period.

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The correct answer is: the rate that a security would pay if no inflation were expected over its holding period.

Question 11

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Which of the following statements is correct regarding diversification?

Select one:

Diversifying reduces the dollar return of the portfolio.

Diversifying reduces the percentage return of the portfolio.

None of these statements are correct.

Diversifying reduces the market risk of the portfolio.

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The correct answer is: None of these statements are correct.

Question 12

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This is the risk that a security issuer will miss an interest or principal payment or continue to miss such payments.

Select one:

maturity risk

liquidity risk

inflation risk

default risk

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The correct answer is: default risk

Question 13

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According to the Fisher Effect equation the nominal rate of interest is equal to

Select one:

The real rate of interest plus the inflation rate.

The real rate of interest divided by the inflation rate.

The real rate of interest minus the inflation rate.

The real rate of interest multiplied by the inflation rate.

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The correct answer is: The real rate of interest plus the inflation rate.

Question 14

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The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's:

Select one:

market capitalization.

constant growth model.

book value.

market makers.

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The correct answer is: market capitalization.

Question 15

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Which of the below is a measure of the sensitivity of a stock or portfolio to market risk?

Select one:

efficient market

beta

hedge

behavioral finance

Feedback

The correct answer is: beta

Question 16

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Under which conditions will an investor demand a smaller return (yield) on a bond?

Select one:

The bond issue is upgraded from A to AA.

Interest rates increase due to increasing inflation rate.

The bond issue is downgraded from A to BBB.

None of these conditions will cause an increase in the bond's yield.

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The correct answer is: The bond issue is upgraded from A to AA.

Question 17

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Assume that a bond is quoted to be selling at a price equal to $93, per $100 of face value. This implies that

Select one:

The bond is a discount bond.

The bond’s yield to maturity is 7% below its coupon rate.

The bond’s yield to maturity is 7% above its coupon rate.

The bond is a premium bond.

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The correct answer is: The bond is a discount bond.

Question 18

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To find the percentage return of an investment,

Select one:

divide 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.

multiply 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

The correct answer is: divide the dollar return by the investment's value at the beginning of the period.

Question 19

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Which of the following statements is correct?

Select one:

A dominant portfolio is one that has the highest risk and highest return within a set of portfolios.

None of these statements is correct.

By adding stocks to your portfolio, it is possible to effectively eliminate nearly all of the market risk.

The dollar return is a more useful measure than percentage return to compare performance among investors because it more accurately reflects the change in wealth of the investor.

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The correct answer is: None of these statements is correct.

Question 20

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This is defined as the portion of total risk that is attributable to firm (or industry) factors and can be reduced through diversification.

Select one:

firm specific risk

modern portfolio risk

total risk

market risk

Feedback

The correct answer is: firm specific risk

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, November 28, 2021, 1:38 PM
State	Finished
Completed on	Sunday, November 28, 2021, 1:43 PM
Time taken	4 mins 39 secs
Grade	10.00 out of 10.00 (100%)

Top of Form

Question 1

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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?

Select one:

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.

Because the cash flows resulting from owning a stock are typically more risky than the cash flows resulting from owning a bond.

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The correct answer is: Because the cash flows resulting from owning a stock are typically more risky than the cash flows resulting from owning a bond.

Question 2

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When residual cash flows are high, stock values will be:

Select one:

unpredictable.

low.

high.

unchanged.

Feedback

The correct answer is: high.

Question 3

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As residual claimants, these investors claim any cash flows to the firm that remain after the firm pays all other claims.

Select one:

common stockholders

bondholders

creditors

preferred stockholders

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The correct answer is: common stockholders

Question 4

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We can estimate a stock's value by:

Select one:

using the book value of the total stockholder equity section.

compounding the past dividends and past stock price appreciation.

discounting the future dividends and future stock price appreciation.

using the book value of the total assets divided by the number of shares outstanding.

Feedback

The correct answer is: discounting the future dividends and future stock price appreciation.

Question 5

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Stock valuation model dynamics make clear that higher discount rates lead to

Select one:

lower growth rates.

higher valuations.

higher growth rates.

lower valuations.

Feedback

The correct answer is: lower valuations.

Question 6

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Question text

If the management team of a company decides to increase the dividend payment for the current year

Select one:

The stock price should decline because the present value will be lower

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 rise because the present value will be higher

Feedback

The correct answer is: 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.

Question 7

Correct

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Question text

Which of the following will only be executed if the order's price conditions are met?

Select one:

A trade

An unlimited order

A spread

A limit order

Feedback

The correct answer is: A limit order

Question 8

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Question text

Which of the following is an electronic stock market without a physical trading floor?

Select one:

American Stock Exchange

New York Stock Exchange

Nasdaq Stock Market

Mercantile Exchange

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The correct answer is: Nasdaq Stock Market

Question 9

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GEN has 10 million shares outstanding and a stock price of $89.25. What is GEN's market capitalization?

Select one:

$89,250,000,000

$892,500,000

$89,250,000

$892,500

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The correct answer is: $892,500,000

Question 10

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Question text

Which of these investors earn returns from receiving dividends and from stock price appreciation?

Select one:

Stockholders

Investment bankers

Managers

Bondholders

Feedback

The correct answer is: Stockholders

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, November 28, 2021, 1:44 PM
State	Finished
Completed on	Sunday, November 28, 2021, 1:48 PM
Time taken	4 mins 13 secs
Grade	10.00 out of 10.00 (100%)

Top of Form

Question 1

Correct

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Question text

When residual cash flows are high, stock values will be:

Select one:

high.

unchanged.

low.

unpredictable.

Feedback

The correct answer is: high.

Question 2

Correct

1.00 points out of 1.00

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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?

Select one:

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.

Because companies usually use more equity than debt.

Feedback

The correct answer is: Because the cash flows resulting from owning a stock are typically more risky than the cash flows resulting from owning a bond.

Question 3

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Question text

The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's:

Select one:

market makers.

market capitalization.

book value.

constant growth model.

Feedback

The correct answer is: market capitalization.

Question 4

Correct

1.00 points out of 1.00

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Question text

If the management team of a company decides to increase the dividend payment for the current year

Select one:

The stock price should decline because the present value will be lower

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 stock price should rise because the present value will be higher

The discount rate will change because it will change the risk of the cash flows.

Feedback

The correct answer is: 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.

Question 5

Correct

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Question text

Stock valuation model dynamics make clear that lower dividend growth rates lead to

Select one:

higher discount rates.

lower valuations.

lower discount rates.

higher valuations.

Feedback

The correct answer is: lower valuations.

Question 6

Correct

1.00 points out of 1.00

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Question text

All of the following are stock market indices except _________________.

Select one:

Mercantile 1000

Standard & Poor's 500 Index

Nasdaq Composite Index

Dow Jones Industrial Average

Feedback

The correct answer is: Mercantile 1000

Question 7

Correct

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Question text

We can estimate a stock's value by:

Select one:

using the book value of the total assets divided by the number of shares outstanding.

discounting the future dividends and future stock price appreciation.

using the book value of the total stockholder equity section.

compounding the past dividends and past stock price appreciation.

Feedback

The correct answer is: discounting the future dividends and future stock price appreciation.

Question 8

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Stock valuation model dynamics make clear that higher discount rates lead to

Select one:

higher valuations.

lower valuations.

higher growth rates.

lower growth rates.

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The correct answer is: lower valuations.

Question 9

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Which of the following will only be executed if the order's price conditions are met?

Select one:

A limit order

A trade

An unlimited order

A spread

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The correct answer is: A limit order

Question 10

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These are valued as a special zero-growth case of the constant growth rate model.

Select one:

preferred stock

future dividends

future stock prices

common stock

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The correct answer is: preferred stock

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, November 28, 2021, 1:50 PM
State	Finished
Completed on	Sunday, November 28, 2021, 2:15 PM
Time taken	25 mins 1 sec
Points	3.00/4.00
Grade	7.50 out of 10.00 (75%)

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Question 1

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Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their recent dividend was $0.69. What is the value of their stock when the required rate of return is 15.13 percent?

Select one:

$53.05

$36.61

$49.00

$14.80

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The correct answer is: $36.61

Question 2

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American Eagle Outfitters (AEO) recently paid a $0.38 dividend. The dividend is expected to grow at a 14.5 percent rate. At the current stock price of $26.07, what is the return shareholders are expecting?

Select one:

17.32 percent

17.18 percent

16.17 percent

16.31 percent

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The correct answer is: 16.17 percent

Question 3

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A firm recently paid a $1.00 annual dividend. The dividend is expected to increase by 15 percent in each of the next four years. In the fourth year, the stock price is expected to be $100. If the required rate for this stock is 16 percent, what is its value?

Select one:

$62.87

$59.14

$63.30

$58.74

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The correct answer is: $59.14

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A fast growing firm recently paid a dividend of $0.50 per share. The dividend is expected to increase at a 20 percent rate for the next 3 years. Afterwards, a more stable 10 percent growth rate can be assumed. If a 13 percent discount rate is appropriate for this stock, what is its value?

Select one:

$23.65

$25.75

$14.13

$26.66

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The correct answer is: $23.65

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, November 28, 2021, 2:40 PM
State	Finished
Completed on	Sunday, November 28, 2021, 2:42 PM
Time taken	2 mins 15 secs
Points	4.00/4.00
Grade	10.00 out of 10.00 (100%)

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Question 1

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If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 17 percent, what's the value of the stock?

Select one:

$42.86

$17.65

$30.00

$23.08

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The correct answer is: $17.65

Question 2

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Select one:

$26.66

$23.65

$25.75

$14.13

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The correct answer is: $23.65

Question 3

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Select one:

16.31 percent

16.17 percent

17.18 percent

17.32 percent

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The correct answer is: 16.17 percent

Question 4

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A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in three years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

Select one:

$3.92

$5.55

$3.47

$4.42

Feedback

The correct answer is: $3.92

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, November 28, 2021, 2:41 PM
State	Finished
Completed on	Sunday, November 28, 2021, 3:00 PM
Time taken	19 mins 3 secs
Grade	7.00 out of 10.00 (70%)

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Question 1

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This is defined as the volatility of an investment, which includes firm specific risk as well as market risk.

Select one:

total risk

standard deviation

diversifiable risk

market risk

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The correct answer is: total risk

Question 2

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Which of the following is correct?

Select one:

Total risk is measured by the standard deviation.

If you observe a high variability in a stock's returns you can infer that the stock is very risky.

There is a positive relationship between risk and return.

All of these statements are correct.

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The correct answer is: All of these statements are correct.

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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.

Select one:

Portfolio Blue dominates Portfolio Yellow

Portfolio Blue dominates Portfolio Purple

Portfolio Purple dominates Portfolio Blue

Portfolio Purple dominates Portfolio Yellow

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The correct answer is: Portfolio Blue dominates Portfolio Purple

Question 4

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This is another term for market risk.

Select one:

firm specific risk

total risk

Non-diversifiable risk

modern portfolio risk

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The correct answer is: Non-diversifiable risk

Question 5

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Jenna receives an investment newsletter that recommends that she invest in a stock that has doubled the return of the S&P 500 in the last two months. It also claims that this stock is a "safe bet" for the future. Which of the following statements is correct regarding this information?

Select one:

It is common for individual stocks to double the return of the S&P 500 and still be a "safe bet."

None of these statements is correct.

The investment newsletter contains contrary information since the stock must be a high risk and therefore cannot also be a "safe bet."

This investment newsletter is most likely correct because they most likely have some special knowledge about the stock.

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The correct answer is: The investment newsletter contains contrary information since the stock must be a high risk and therefore cannot also be a "safe bet."

Question 6

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Which of the following statements is correct?

Select one:

None of these statements is correct.

Uncorrelated assets have a correlation of -1.0.

We can typically add many stocks together to fully eliminate the market risk in a portfolio.

Most common stocks are positively correlated with each other because they are impacted by the same economic factors.

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The correct answer is: Most common stocks are positively correlated with each other because they are impacted by the same economic factors.

Question 7

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Which of the following statements is correct?

Select one:

A single stock has a lot of diversifiable risk.

A single stock has more market risk than a diversified portfolio of stocks.

Bonds and stocks have a very high correlation because they are both financial assets.

None of these statements are correct.

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The correct answer is: A single stock has a lot of diversifiable risk.

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Which of the below is the best description of the effect of portfolio diversification?

Select one:

Risk is reduced without necessarily reducing the expected return.

Risk is reduced at the same time as expected return is reduced.

Risk is increased while holding the expected return roughly constant.

Both risk and expected return are rising at the same time.

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The correct answer is: Risk is reduced without necessarily reducing the expected return.

Question 9

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Which of these is the term for portfolios with the highest return possible for each risk level?

Select one:

Modern portfolios

Total portfolios

Efficient portfolios

Optimal portfolios

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The correct answer is: Efficient portfolios

Question 10

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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

Select one:

increase the risk of the portfolio because stocks are more risky than bonds, and also increase the return of the portfolio.

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.

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The correct answer is: reduce the risk of the portfolio even though stocks are more risky than bonds.

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, November 28, 2021, 3:01 PM
State	Finished
Completed on	Sunday, November 28, 2021, 3:09 PM
Time taken	8 mins 28 secs
Grade	10.00 out of 10.00 (100%)

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Question 1

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Which of these is defined as a combination of investment assets held by an investor?

Select one:

Market basket

All of these

Bundle

Portfolio

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The correct answer is: Portfolio

Question 2

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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.

Select one:

Rail Haul, Poker-R-Us, Idol Staff

Poker-R-Us, Idol Staff, Rail Haul

Idol Staff, Poker-R-Us, Rail Haul

Idol Staff, Rail Haul, Poker-R-Us

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The correct answer is: Poker-R-Us, Idol Staff, Rail Haul

Question 3

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Portfolio Weights An investor owns $10,000 of Adobe Systems stock, $15,000 of Dow Chemical, and $25,000 of Office Depot. What are the portfolio weights of each stock?

Select one:

Adobe System = 0.3, Dow Chemical = 0.2, Office Depot = 0.5

Adobe System = 0.2667, Dow Chemical = 0.3333, Office Depot = 0.4

Adobe System = 0.2, Dow Chemical = 0.3, Office Depot = 0.5

Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333

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The correct answer is: Adobe System = 0.2, Dow Chemical = 0.3, Office Depot = 0.5

Question 4

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To find the percentage return of an investment,

Select one:

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.

multiply the dollar return by the investment's value at the beginning of the period.

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The correct answer is: divide the dollar return by the investment's value at the beginning of the period.

Question 5

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This is a measurement of the co-movement between two variables that ranges between -1 and +1.

Select one:

total risk

correlation

coefficient of variation

standard deviation

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The correct answer is: correlation

Question 6

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Sally wants to invest in only two stocks. Which pair of stocks should Sally select, provided they all offer similar returns?

Select one:

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 A and B, which move downward at the same time.

Stocks G and H, which move randomly at the same time.

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The correct answer is: Stocks C and D, which move in opposite directions at the same time.

Question 7

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Consider the following correlations:

Given this data, which of the following is most preferable if an investor can only select one pair of companies?

Select one:

Apple and IBM

It does not matter which two are selected—there is no preference order.

Disney and Apple

Disney and IBM

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The correct answer is: Disney and Apple

Question 8

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Question text

Which statement is true?

Select one:

The larger the standard deviation, the higher the total risk.

The larger the standard deviation, the lower the total risk.

The larger the standard deviation, the more portfolio risk.

The standard deviation is not an indication of total risk.

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The correct answer is: The larger the standard deviation, the higher the total risk.

Question 9

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Question text

Jane Adams invests all her money in the stock of one firm. Which of the following will likely be true?

Select one:

Her return will have less 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 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.

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The correct answer is: Her return will have more volatility than the return in the overall stock market.

Question 10

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From 1950 to 2007, the average return in the stock market, as measured by the S&P 500, was 13.2 percent and a standard deviation of 17 percent. Given this information, which of the following statements is correct?

Select one:

With a standard deviation this high, it is likely that an investor will lose money in some years over a 25-year investment period.

This investment is not very good since the standard deviation is greater than the average return.

All of these statements are correct.

With an average return this high, it is unlikely that an investor will lose money in the stock market in the next year or two.

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The correct answer is: With a standard deviation this high, it is likely that an investor will lose money in some years over a 25-year investment period.

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, November 28, 2021, 3:11 PM
State	Finished
Completed on	Sunday, November 28, 2021, 3:21 PM
Time taken	10 mins 49 secs
Grade	10.00 out of 10.00 (100%)

Top of Form

Question 1

Correct

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Question text

Which of these is the portion of total risk that is attributable to overall economic factors?

Select one:

Total risk

Firm specific risk

Market risk

Modern portfolio risk

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The correct answer is: Market risk

Question 2

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Question text

Sally wants to invest in only two stocks. Which pair of stocks should Sally select, provided they all offer similar returns?

Select one:

Stocks E and F, which move upward 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 C and D, which move in opposite directions at the same time.

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The correct answer is: Stocks C and D, which move in opposite directions at the same time.

Question 3

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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?

Select one:

An investor is most likely to consider stock A to be riskier than stock B.

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 B to be riskier than stock A.

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The correct answer is: An investor is most likely to consider stock B to be riskier than stock A.

Question 4

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Question text

Which of the following statements is correct?

Select one:

We can typically add many stocks together to fully eliminate the market risk in a portfolio.

None of these statements is correct.

Most common stocks are positively correlated with each other because they are impacted by the same economic factors.

Uncorrelated assets have a correlation of -1.0.

Feedback

The correct answer is: Most common stocks are positively correlated with each other because they are impacted by the same economic factors.

Question 5

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Question text

Select one:

All of these statements are correct.

With an average return this high, it is unlikely that an investor will lose money in the stock market in the next year or two.

This investment is not very good since the standard deviation is greater than the average return.

With a standard deviation this high, it is likely that an investor will lose money in some years over a 25-year investment period.

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The correct answer is: With a standard deviation this high, it is likely that an investor will lose money in some years over a 25-year investment period.

Question 6

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Question text

Diversification works better when

Select one:

Stock returns are less correlated with each other.

The difference in expected returns is small.

Stock returns are more correlated with each other.

The difference in expected returns is high.

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The correct answer is: Stock returns are less correlated with each other.

Question 7

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Question text

This is another term for market risk.

Select one:

Non-diversifiable risk

modern portfolio risk

firm specific risk

total risk

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The correct answer is: Non-diversifiable risk

Question 8

Correct

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Question text

Which of these is the term for portfolios with the highest return possible for each risk level?

Select one:

Modern portfolios

Total portfolios

Optimal portfolios

Efficient portfolios

Feedback

The correct answer is: Efficient portfolios

Question 9

Correct

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Question text

Which of the following is correct?

Select one:

Investors can reduce the risk in their portfolio by investing in international stocks since they tend to have low correlation with our own stock market.

All of these statements are correct.

Your optimal portfolio is an efficient portfolio with your desired risk level.

Combining both stocks and bonds will likely reduce risk in a portfolio because the two assets have low correlation.

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The correct answer is: All of these statements are correct.

Question 10

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Question text

Consider the following correlations:

Given this data, which of the following is most preferable if an investor can only select one pair of companies?

Select one:

Apple and IBM

Disney and IBM

It does not matter which two are selected—there is no preference order.

Disney and Apple

Feedback

The correct answer is: Disney and Apple

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Trine | Moodle

FIN--5063-1D2-FA-2021 - Corporate Finance

Started on	Sunday, November 28, 2021, 3:22 PM
State	Finished
Completed on	Sunday, November 28, 2021, 3:32 PM
Time taken	9 mins 56 secs
Points	5.00/5.00
Grade	10.00 out of 10.00 (100%)

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Question 1

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The past four monthly returns for K and Company are 2.50 percent, 1.20 percent, - 0.40 percent, and 0.80 percent. What is the average monthly return?

Select one:

1.37 percent

1.03 percent

0.82 percent

4.10 percent

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The correct answer is: 1.03 percent

Question 2

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FedEx Corp. stock ended the previous year at $165.30 per share. It paid a $1.20 per share dividend last year. It ended last year at $173.90. If you owned 600 shares of FedEx, what was your percent return?

Select one:

4.95%

5.20%

5.64%

5.93%

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The correct answer is: 5.93%

Question 3

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Select one:

$4,440

$5,160

$9.80

$5,880

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The correct answer is: $5,880

Question 4

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Question text

The past four monthly returns for K and Company are 1.50 percent, 0.40 percent, - 0.60 percent, and 1.20 percent. What is the standard deviation of monthly returns?

Select one:

0.54 percent

0.01 percent

1.63 percent

0.94 percent

Feedback

The correct answer is: 0.94 percent

Question 5

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Year-to-date, Company O had earned a 2.10 percent return. During the same time period, Company V earned - 0.80 percent and Company M earned 3.70 percent. If you have a portfolio made up of 30 percent Company O, 20 percent Company V, and 50 percent Company M, what is your portfolio return?

Select one:

10.40 percent

2.32 percent

5.00 percent

1.67 percent

Feedback

The correct answer is: 2.32 percent

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