Reference no: EM13895231
1-Currency risk is a major problem for the long-term investor in a well -diversified international mutual fund.
2-An efficient company in a high risk industry may be less risky than an inefficient company in a low risk industry.
3-The mean and standard deviation is all the information that is needed to describe most stock probability distributions.
4-If two securities with the same standard deviation are perfectly negatively correlated, splitting an investment equally between the two securities completely eliminates all variability.
5- The longer the time thatinvestors postpone their consumption, the greater the chance that something adverse will occur to lessen the value of their investment.
6-For positive interest rates with more than one cash flow, an annuity due is always worth more than an ordinary annuity.
7- A project that is not acceptable under the net present value (NPV) criteria may be acceptable under the internal rate of return (IRR) criteria, so both analyses are needed.
8-The pay-back period analyzes an investment by dividing the annual cash flow by the amount of the cash investment in order to determine the cash return.
9-Convexity measures the change in a bond's price to small changes in interest rates.
10-A price increase when interest rates decrease is equal to the price decrease when interest rates increase.
11-The intrinsic value of a stock can be estimated by calculating the present value of the future cash flows expected to be received.
12-The P/E valuation model and dividend discount model should theoretically provide the same stock value.
13-The Markowitz Portfolio Theory states that given the choice between multiple assets with equal expected returns, investors prefer the asset with the greatest risk
14-The Black-Scholes model assumes two outcomes and discrete time periods
15- The lower the correlation between two assets, the greater the potential for reducing the risk of a portfolio containing the two assets.
16- After individual securities or mutual funds have been selected, the asset allocation decision must be made.
17-The risk-return characteristics of the portfolio are more important than the risk-return characteristic of an individual asset
18-Dividend Reinvestment Plans (DRIPs) allow shareholders to take dividends in the form of cash.
19- Negative leverage occurs if the investment does not generate sufficient cash flow to pay off the debt.
20- Investors should consider using financial leverage if they want short-term appreciation rather than a long-term return.
21- A portfolio that offers the lowest risk for a given level of return is known as an efficient portfolio.
22- Studies have shown that investing in different industries as well as different countries reduces portfolio risk.
23- The index used to represent market returns is always assigned a beta of 1.0.
24 - The higher a bond's Moody's or Standard & Poor's rating, the higher its yield.
25- A down-sloping yield curve indicates that interest rates are about to rise.
26 - Like ordinary stocks, exchange traded funds (ETFs) can be sold short and most exchange-traded funds are index funds.
27- Puts and calls are issued by the same corporation that issued the underlying stock.
28- Unlike stocks and bonds, futures contracts trade only at specific times during normal working hours.
29- Utility can be measured by the risk-return trade-off reflected in the Capital Asset Pricing Model (CAPM).
30- A good benchmark reflects both the client's needs and the manager's style.