Question 1

If the returns on a stock index can be characterized by a normal distribution with mean 12%, the probability that returns will be lower than 12% over the next period equals ________.

Accepted Answer

A)   50%
B)   25%
C)   46%
D)   33%E) A) and C)
F) A) and B)

Question 2

There is an overall relationship between ________ and ________. Larger stocks have a lower volatility overall.

Accepted Answer

A)   size, risk
B)   mean, standard deviation
C)   risk aversion, size
D)   volatility, meanE) B) and C)
F) A) and C)

Question 3

The S&P 500 index delivered a return of 25%, 15%, -35%, and -5% over four successive years. What is the arithmetic average annual return for four years?

Accepted Answer

A)   -5%
B)   0%
C)   5%
D)   3%E) B) and D)
F) B) and C)

Question 4

A company's stock price dropped when it announced that its revenue had decreased because of the quality issues of its products. This is an example of ________.

Accepted Answer

A)   market risk
B)   unsystematic risk
C)   systematic risk
D)   undiversifiable riskE) B) and D)
F) A) and D)

Question 5

Which of the following statements is FALSE?

Accepted Answer

A)   Expected return should rise proportionately with volatility.
B)   Investors would not choose to hold a portfolio that is more volatile unless they expected to earn a higher return.
C)   Smaller stocks have lower volatility than larger stocks.
D)   The largest stocks are typically more volatile than a portfolio of large stocks.E) None of the above
F) A) and B)

Question 6

Many former employees at AlphaEnergy, an energy trading and supply company, had a large part of their portfolio invested in AlphaEnergy's stock. These employees were bearing a high degree of ________ risk.

Accepted Answer

A)   unsystematic
B)   systematic
C)   market-specific
D)   non-diversifiableE) C) and D)
F) A) and B)

Question 7

Which of the following statements is TRUE?

Accepted Answer

A)   On average, smaller stocks have lower volatility than Treasury bills.
B)   Portfolios of smaller stocks are typically less volatile than individual small stocks.
C)   On average, smaller stocks have lower returns than larger stocks.
D)   On average, Treasury bills have higher returns than stocks.E) None of the above
F) A) and C)

Question 8

Consider the following price and dividend data for Quicksilver Inc.:

Assume that you purchased Quicksilver's stock at the closing price on December 31, 2004 and sold it after the dividend had been paid at the closing price on January 26, 2005. Your total return rate (yield)  for this period is closest to ________.

Accepted Answer

A)   0.97%
B)   -4.00%
C)   -4.97%
D)   1.06%E) A) and D)
F) B) and D)

Question 9

Which of the following investments had the largest fluctuations overall return over the past eighty years?

Accepted Answer

A)   small stocks
B)   S&P 500
C)   corporate bonds
D)   Treasury billsE) B) and C)
F) A) and D)

Question 10

Suppose you invested $100 in the Ishares High Yield Fund (HYG)  a month ago. It paid a dividend of $2 today and then you sold it for $95. What was your dividend yield and capital gains yield on the investment?

Accepted Answer

A)   2%, -5%
B)   2%, 5%
C)   -2%, 5%
D)   5%, 2%E) A) and D)
F) All of the above

Exam 11: Risk and Return in Capital Markets

Many former employees at AlphaEnergy, an energy trading and supply company, had a large part of their portfolio invested in AlphaEnergy's stock. These employees were bearing a high degree of ________ risk.

Correct Answer
verified

A company's stock price dropped when it announced that its revenue had decreased because of the quality issues of its products. This is an example of ________.

Correct Answer
verified

The S&P 500 index delivered a return of 25%, 15%, -35%, and -5% over four successive years. What is the arithmetic average annual return for four years?

Correct Answer
verified

Suppose you invested $100 in the Ishares High Yield Fund (HYG) a month ago. It paid a dividend of $2 today and then you sold it for $95. What was your dividend yield and capital gains yield on the investment?

Correct Answer
verified

If the returns on a stock index can be characterized by a normal distribution with mean 12%, the probability that returns will be lower than 12% over the next period equals ________.

Correct Answer
verified

Correct Answer
verified

Which of the following statements is FALSE?

Correct Answer
verified

Which of the following statements is TRUE?

Correct Answer
verified

There is an overall relationship between and . Larger stocks have a lower volatility overall.

Correct Answer
verified

Which of the following investments had the largest fluctuations overall return over the past eighty years?

Correct Answer
verified

Exam 11: Risk and Return in Capital Markets

Many former employees at AlphaEnergy, an energy trading and supply company, had a large part of their portfolio invested in AlphaEnergy's stock. These employees were bearing a high degree of ________ risk.

Correct AnswerverifiedShow Answer

A company's stock price dropped when it announced that its revenue had decreased because of the quality issues of its products. This is an example of ________.

Correct AnswerverifiedShow Answer

The S&P 500 index delivered a return of 25%, 15%, -35%, and -5% over four successive years. What is the arithmetic average annual return for four years?

Correct AnswerverifiedShow Answer

Suppose you invested $100 in the Ishares High Yield Fund (HYG) a month ago. It paid a dividend of $2 today and then you sold it for $95. What was your dividend yield and capital gains yield on the investment?

Correct AnswerverifiedShow Answer

If the returns on a stock index can be characterized by a normal distribution with mean 12%, the probability that returns will be lower than 12% over the next period equals ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

There is an overall relationship between ________ and ________. Larger stocks have a lower volatility overall.

Correct AnswerverifiedShow Answer

Which of the following investments had the largest fluctuations overall return over the past eighty years?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

There is an overall relationship between and . Larger stocks have a lower volatility overall.

Correct Answer
verified

Correct Answer
verified