FINC/320 FINC620 FINC 620 WEEK 3 QUIZ

FINC 620 WEEK 3 QUIZ

  • Question 1
   
 

Kids Toy Co. has had total returns over the past five years of 0%, 7%, -2%, 10%, and 12%. What was the arithmetic average return on this stock?

      
   

Answers:

 

A. 5.40%
 

B. 5.50%
 

C. 6.15%
 

D. 6.33%
 

E. 6.75%
     
  • Question 2
   
 

You purchased 300 shares of Deltona, Inc. stock for $44.90 a share. You have received a total of $630 in dividends and $14,040 in proceeds from selling the shares. What is your capital gains yield on this stock?

      
   

Answers:

A. 4.06%
 

 

B. 4.23%
 

C. 4.68%
 

D. 8.55%
 

E. 8.91%
     
  • Question 3
   
 

The risk premium is computed by ______ the average return for the investment.

      
   

Answers:

A. subtracting the inflation rate from
 

B. adding the inflation rate to
 

 

C. subtracting the average return on the U.S. Treasury bill from
 

D. adding the average return on the U.S. Treasury bill to
 

E. subtracting the average return on long-term government bonds from
     
  • Question 4
   
 

A year ago, you purchased 300 shares of IXC Technologies, Inc. stock at a price of $9.03 per share. The stock pays an annual dividend of $.10 per share. Today, you sold all of your shares for $28.14 per share. What is your total dollar return on this investment?

      
   

Answers:

A. $5,703
 

B. $5,733
 

C. $5,753
 

 

D. $5,763
 

E. $5,853
     
  • Question 5
   
 

The excess return required from a risky asset over that required from a risk-free asset is called the:

      
   

Answers:

 

A. risk premium.
 

B. geometric premium.
 

C. excess return.
 

D. average return.
 

E. variance.
     
  • Question 6
   
 

Estimates using the arithmetic average will probably tend to _____ values over the long-term while estimates using the geometric average will probably tend to _____ values over the short-term.

      
   

Answers:

A. overestimate; overestimate
 

 

B. overestimate; underestimate
 

C. underestimate; overestimate
 

D. underestimate; underestimate
 

E. accurately; accurately
     
  • Question 7
   
 

One year ago, you purchased a stock at a price of $32.50. The stock pays quarterly dividends of $.40 per share. Today, the stock is worth $34.60 per share. What is the total amount of your dividend income to date from this investment?

      
   

Answers:

A. $0.40
 

 

B. $1.60
 

C. $2.10
 

D. $2.50
 

E. $3.70
     
  • Question 8
   
 

A portfolio of large company stocks would contain which one of the following types of securities?

      
   

Answers:

A. stocks of the firms which represent the smallest 20% of the companies listed on the NYSE
 

B. U.S. Treasury bills
 

C. long-term corporate bonds
 

 

D. stocks of firms included in the S&P 500 index
 

E. long-term government bonds
     
  • Question 9
   
 

Which one of the following measures is relevant to the systematic risk principle?

      
   

Answers:

A. variance
 

B. alpha
 

C. standard deviation
 

D. theta
 

 

E. Beta
     
  • Question 10
   
 

The stock of Big Joe's has a beta of 1.14 and an expected return of 11.6%. The risk-free rate of return is 4%. What is the expected return on the market?

      
   

Answers:

A. 7.60%
 

B. 8.04%
 

C. 9.33%
 

 

D. 10.67%
 

E. 12.16%
     
  • Question 11
   
 

The separation principle states that an investor will:

      
   

Answers:

A. choose any efficient portfolio and invest some amount in the riskless asset to generate the expected return.
 

B. choose an efficient portfolio based on individual risk tolerance or utility.
 

C. never choose to invest in the riskless asset because the expected return on the riskless asset is lower over time.
 

 

D. invest only in the riskless asset and tangency portfolio choosing the weights based on individual risk tolerance.
 

E. All of these.
     
  • Question 12
   
 

The primary purpose of portfolio diversification is to:

      
   

Answers:

A. increase returns and risks.
 

B. eliminate all risks.
 

 

C. eliminate asset-specific risk.
 

D. eliminate systematic risk.
 

E. lower both returns and risks.
     
  • Question 13
   
 

The efficient set of portfolios:

      
   

Answers:

A. contains the portfolio combinations with the highest return for a given level of risk.
 

B. contains the portfolio combinations with the lowest risk for a given level of return.
 

C. is the lowest overall risk portfolio.
 

D. Both contains the portfolio combinations with the highest return for a given level of risk; and contains the portfolio combinations with the lowest risk for a given level of return.
 

E. Both contains the portfolio combinations with the highest return for a given level of risk; and is the lowest overall risk portfolio.
     
  • Question 14
   
 

The beta of an individual security is calculated by:

      
   

Answers:

 

A. dividing the covariance of the security with the market by the variance of the market.
 

B. dividing the correlation of the security with the market by the variance of the market.
 

C. multiplying the variance of the market by the covariance of the security with the market.
 

D. multiplying the variance of the market by the correlation of the security with the market.
 

E. None of these.
     
  • Question 15
   
 

The measure of beta associates most closely with:

      
   

Answers:

A. idiosyncratic risk.
 

B. risk-free return.
 

 

C. systematic risk.
 

D. unexpected risk.
 

E. unsystematic risk.
     

 

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