Reference no: EM133305844
Questions
1. Investment return is always fixed ahead of time.
A) True
B) False
2. Complete the statement with the pair(s) of answers that carry the most validity: To achieve a ___ return, one might need to bear ___ risks.
A) High, fewer
B) Low, greater
C) High, greater
D) High, No
3. An investor could experience a capital loss when:
A) The sale price is higher than the initial purchase price.
B) The initial purchase price is lower than the sale price.
C) The sale price is lower than the initial purchase price.
D) The sale price and initial purchase price are equal to each other.
4. You become a shareholder of a company when you buy 600 shares at $65 per share. If the dividend distributed over the year is $1.76 per share, what is your total dollar gain if you decide to sell all 600 shares after one year at $95 per share?
A) $18,000
B) $19,056
C) $39,000
D) $40,056
E) $57,000
5. An accurate way for an investor to capture his or her stock investment return is to use the percentage return.
A) True
B) False
6. Suppose you become a shareholder of a company when you buy 500 shares at $75 per share. If the dividend distributed over the next year is $2.76 per share, what is your percentage gain if you decide to sell all 500 shares after one year at $91 per share?
A) 18%
B) 20%
C) 21%
D) 25%
7. Suppose a mutual fund results in the following 5-year return values: 1.48% (2016), 10.59% (2017), 15.68% (2018), -7.68% (2019), and 23.22% (2020). Based on these values, calculate the geometric average return.
A) 8.11%
B) 10.08%
C) 11.49%
D) 15.93%
8. Assume a mutual fund has returns of 1.48% (2016), 10.59% (2017), 15.68% (2018), -7.68% (2019), and 23.22% (2020). What would the variance be for this particular investment situation?
A) 0.006
B) 0.007
C) 0.015
D) 0.005
9. We calculate the standard deviation as the ___ of variance.
A) Sum
B) Product
C) Difference
D) Power
E) Square root
10. Which of the following are characteristics of the Sharpe ratio?
Select all that apply.
A) Only measures the risk of investment
B) Ranks portfolio performance
C) Fund manager performance indicator
D) Only measures reward of investment
11. According to the video, which of the following factors are considered as systematic risks?
A) A sudden change in a corporation's leadership
B) Unemployment rate
D) Inflation
E) Product Recalls
F) Lawsuits of a firm
G) GDP
H) Exchange rate
12. Which of the following describes a portfolio or is incorporated within a portfolio?
A) Large amounts of a single stock
B) Multiple stocks from different industries
C) Singularity of assets
D) Provides potential for mitigating diversifiable risks
E) No potential for mitigating diversifiable risks
F) No diversification of assets
G) Provides diversification of assets
13. Mutual fund investors tend to share profits as well as losses of the funds, while having direct ownership of the securities.
A) True
B) False
14. Undiversifiable risk can be measured by how the individual stock return moves with the overall stock market.
A) True
B) False
15. how much data should be used for beta coefficient estimation along with the data frequency that is used?
A) 4 years, per monthly basis
B) 4 years, per quarterly basis
C) 5 years, per quarterly basis
D) 5 years, per monthly basis
E) 6 years, per monthly basis
F) 6 years, per quarterly basis
16. The expected rate of return on an investment equals the expected rate of return on the market portfolio indicates that the investment's:
A) Beta coefficient is equal to zero (0)
B) Beta coefficient is less than one (1).
C) Beta coefficient is equal to one (1).
D) Beta coefficient is greater than one (1).
17. If an asset is plotted ___ the security market line (SML), this is an indicator that it is ___.
A) Below, overvalued
B) Above, undervalued
C) Below, undervalued
D) Above, overvalued
18. Let's assume a risk-free rate of 2.7% on a ten-year Treasury bond in the United States. If there is an 8.3% expected rate of return from the overall market, and Toyota Company has a beta of 1.35, what is the required rate of return using the CAPM formula? Round to one decimal place.
A) 9.2%
B) 10.3%
C) 11.1%
D) 14.3%
E) 17.6%
19. The risk that affects almost all stocks in the market is:
A) Systematic risks
B) Unsystematic risks
C) Can be eliminated through diversification
D) Cannot be eliminated through diversification
20. An evaluative tool used for measuring the sensitivity of individual securities to the overall movements in the market is called:
A) Sharpe ratio
B) Beta coefficient
C) Risk-free rate
D) Risk-to-reward ratio