Incorrect Which of the following statements is CORRECT? Answer Selected Answer: If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rates of return on stocks with betas less than 1.0 will decline while returns on stocks with betas above 1.0 will increase. Correct Answer: If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rate of return on an average stock will remain
Words: 2155 - Pages: 9
material in Chapters 4 through 7. | Results Displayed | Submitted Answers, Correct Answers, Feedback | * Question 1 2 out of 2 points | | | Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT? | | | | | Selected Answer: | The periodic rate of interest is 2% and the effective rate of interest is greater than 8%. | Correct Answer: | The periodic rate of interest is 2% and the effective rate of
Words: 1830 - Pages: 8
31 1. Which of the following bonds has the greatest interest rate price risk? |a. |A 10-year $100 annuity. | |b. |A 10-year, $1,000 face value, zero coupon bond. | |c. |A 10-year, $1,000 face value, 10% coupon bond with annual interest payments. | |d. |All 10-year bonds have the same
Words: 1839 - Pages: 8
Midterm questions Assuming that the proceeds of each year are reinvested in the following years, calculate the geometric average annual return from the following sequence of returns: YR 1 = +.20, YR 2 = .15, YR 3 = +.10, YR 4 = +.06 (a) .1263 (b) .0525 (c) .0835 (d) .0443 According to modern portfolio theory, the idea that investors with different indifference curves will hold the same portfolio of risky securities is a result of: (a) diminishing marginal utility of income (b) covariance (c) the
Words: 3286 - Pages: 14
multiplying each outcome or "state" by its respective probability of occurrence for a particular stock, we can construct a payoff matrix of expected returns. a. True b. False (2.2) Standard deviation Answer: a Diff: E [ii]. The tighter the probability distribution of expected future returns, the smaller the risk of a given investment as measured by the standard deviation. a. True b. False (2.2) Coefficient of variation Answer: a Diff: E [iii]. The coefficient of variation
Words: 13492 - Pages: 54
The following 18 questions relate to Ethical and Professional Standards.(27 minutes) 1. An analyst for a foreign branch of HB Investments, which is based in Lagos, has just issued a recommendation on an IPO. Unknown to the analyst, who is a CFA charterholder, members of her team manipulated the valuation model to increase the newly public company's stock price. She and all of the analysts on the team purchased shares of the oversubscribed IPO for their personal accounts and then purchased the remainder
Words: 8736 - Pages: 35
give precedence to: a) b) c) d) e) maintaining their desired debt-equity ratio over paying dividends paying a constant dividend over increasing retained earnings paying dividends over accepting positive investments maintaining a constant level of debt before paying dividends avoiding dividend cuts over changing the debt-equity ratio 2) An investment project is most likely to be accepted by the payback period rule and not accepted by the NPV rule if the project has a) b) c) d) e) a large initial
Words: 5473 - Pages: 22
give precedence to: a) b) c) d) e) maintaining their desired debt-equity ratio over paying dividends paying a constant dividend over increasing retained earnings paying dividends over accepting positive investments maintaining a constant level of debt before paying dividends avoiding dividend cuts over changing the debt-equity ratio 2) An investment project is most likely to be accepted by the payback period rule and not accepted by the NPV rule if the project has a) b) c) d) e) a large initial
Words: 5473 - Pages: 22
Standards. B) not a violation of the Standards as long as client confidentiality is maintained. C) a violation of the Standards unless the manager gets written consent from her employer. D) not a violation of the Standards as long as the manager informs her employer that she intends to accept the incentive. Question 2 Charmaine Townsend, CFA, has been managing a growth portfolio for her clients using a screening process that identifies companies that have high earnings growth
Words: 9440 - Pages: 38
equity value. However, this book value has little resemblance to the real value of the company. First, the assets are recorded at historical costs, which may be much greater than or much less their present market values. Second, assets such as patents, trademarks, loyal customers, and talented managers do not appear on the balance sheet but may have a significant impact on the firm's ability to generate future profits. So while the balance sheet method is simple, it is not accurate; there are better
Words: 15975 - Pages: 64
