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fiinace exam




Question;1. An efficient capital market is best defined as a market in which security prices reflect which one of the following? A. Current inflationB. A risk premiumC. Available informationD. The historical arithmetic rate of returnE. The historical geometric rate of return2. The rate of return on which one of the following is used as the risk-free rate? A. Long-term government bondsB. Long-term corporate bondsC. Inflation, as measured by the Consumer Price IndexD. U.S. Treasury billE. Large-company stocks3. Over the past five years, a stock returned 8.3 percent, -32.5 percent, -2.2 percent, 46.9 percent and 11.8 percent. What is the variance of these returns? A. 0.071188B. 0.076290C. 0.081504D. 0.082547E. 0.0913064. The common stock of Western Hill Farms has yielded 16.3 percent, 7.2 percent, 11.8 percent, -3.6 percent, and 9.9 percent over the past five years, respectively. What is the geometric average return? A. 7.91 percentB. 8.03 percentC. 8.11 percentD. 8.27 percentE. 8.32 percent5. A stock has returns for five years of 23 percent, -17 percent, 8 percent, 22 percent, and 3 percent. The stock has an average return of ______ percent and a standard deviation of _____ percent. A. 7.80, 13.54B. 7.80, 14.63C. 7.80, 16.36D. 14.60, 14.63E. 14.60, 16.366. Which one of the following best describes a portfolio? A. Risky securityB. Security equally as risky as the overall marketC. New issue of stockD. Group of assets held by an investorE. Investment in a risk-free security7. Which one of the following describes systemic risk? A. Risk that affects a large number of assetsB. An individual security's total riskC. Diversifiable riskD. Asset specific riskE. Risk unique to a firm's management8. Which one of the following terms best refers to the practice of investing in a variety of diverse assets as a means of reducing risk? A. SystematicB. UnsystematicC. DiversificationD. Security market lineE. Capital asset pricing model9. What is the beta of the following portfolio?Stock Value BetaS $32,800 0.97T $16,700 1.26U $21,100 0.79V $4,600 1.48A. 0.98B. 1.02C. 1.11D. 1.14E. 1.2010. A stock has a beta of 1.24, an expected return of 13.68 percent, and lies on the security market line. A risk-free asset is yielding 2.8 percent. You want to create a $6,000 portfolio consisting of Stock A and the risk-free security such that the portfolio beta is 0.65. What rate of return should you expect to earn on your portfolio? A. 8.50 percentB. 9.16 percentC. 9.33 percentD. 9.41 percentE. 9.56 percent


Paper#60769 | Written in 18-Jul-2015

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