FIN 331 Final Exam Practice Questions Set #1

Question 1

Measured by standard deviation; measure of the dispersion of prices of a security or portfolio

Accepted Answer

volatility

Question 2

'da Bear's Favorite Four Words for Investors

Accepted Answer

BUY LOW, SELL HIGH

Question 3

Losses loom larger than gains.

Accepted Answer

Loss aversion

Question 4

To buy or sell a security or commodity at a specified price or better

Accepted Answer

Limit Order

Question 5

The first widely followed index of U.S. small cap stocks

Accepted Answer

Russell 2000 Index

Question 6

Group of securities that exhibits similar characteristics, behaves similarly in the marketplace

Accepted Answer

Asset class

Question 7

A graphical depiction of how interest rates rise or fall depending upon maturity

Accepted Answer

Yield curve

Question 8

The theoretical investment with zero risk, often seen as a 30-day U.S. Treasury note

Accepted Answer

Risk-free investment

Question 9

The extra "reward" investors receive by subjecting themselves to greater "interest rate risk"

Accepted Answer

Term risk premium

Question 10

When a company files bankruptcy, its debt is said to go into "_________"

Accepted Answer

default

Question 11

A pooled investment vehicle that invests primarily in mortgages

Accepted Answer

Mortgage REIT

Question 12

The risk that your bond's price might fall if interest rates rise

Accepted Answer

Interest rate risk

Question 13

A portfolio consisting of 1/3rd U.S. scv, 1/3 Int.l DM scv, and 1/3 emerging markets value

Accepted Answer

The Larry Portfolio

Question 14

a statistical measure of the dispersion of returns for a given security or market index

Accepted Answer

Standard deviation

Question 15

An investor's financial ability to endure a potential financial loss but still achieve goals

Accepted Answer

Risk capacity

Question 16

All the best music was written prior to 1990

Accepted Answer

I plead the 5th, ABSOLUTELY TRUE, DEFINITELY TRUE, TRUE

Question 17

The only free lunch in investing

Accepted Answer

Diversification

Question 18

The use of projections of asset class returns to change the percentage allocated to each asset class in a portfolio

Accepted Answer

Tactical asset allocation

Question 19

Any type of investment in which a borrower is obligated to make interest payments

Accepted Answer

Fixed income investments

Question 20

a statistic that measures the degree to which two securities move in relation to each other

Accepted Answer

Correlation

Question 21

The collection of investment types that you own, by asset class, by percentages

Accepted Answer

Asset allocation

Question 22

A diversified basket of low price-to-book stocks usually outperforms a basket of high-price-to-book stocks over 20 years

Accepted Answer

Value risk premium

Question 23

Measured by gross profits-to-assets, this factor has a strong predictive factor

Accepted Answer

Profitability factor

Question 24

Added expected return investors expect to receive from investing in stocks, vs. risk-free rate

Accepted Answer

Equity risk premium

Question 25

Means "ownership." In the world of investments, this term refers to stock.

Accepted Answer

Equities

Question 26

This form of the EMH refutes technical analysis (charting)

Accepted Answer

Weak form of the EMH

Question 27

A type of security that signifies ownership in a corporation

Accepted Answer

Stock

Question 28

If you are stuck and don't know where to turn, see ...

Accepted Answer

'DA BEAR

Question 29

Hedge funds often charge this - a mix of annual percentage fees and performance fees

Accepted Answer

2% a year, plus 20% of the gains in the hedge fund

Question 30

This stock index ratio uses the past 10 years' earnings, adjusted for inflation

Accepted Answer

Shiller CAPE 10

Question 31

Widely cited as evidence that individual investors underperform, this study has been criticized

Accepted Answer

Dalbar's Quantitative Analysis of Investment Behavior (QAIB)

Question 32

Your home. Most advisers consider this when determining an asset allocation for you.

Accepted Answer

Personal use asset

Question 33

This incorporates the ERP, value, size, profitability factors and momentum

Accepted Answer

Fama-French 5-factor model

Question 34

Where investors tend to evaluate their performance based on results that just occurred

Accepted Answer

recency bias

Question 35

Fees charged by mutual funds for "marketing expenses" - part of the annual expense ratio

Accepted Answer

12b-1 fees

Question 36

An investment adviser who is paid solely by the client (no commissions, no 12b-1 fees)

Accepted Answer

Fee-only investment adviser

Question 37

Assessing this, as a part of providing investment advice, is viewed as essential by many

Accepted Answer

risk tolerance

Question 38

This form of the EMH is not generally accepted, due to CEO and inside information trading

Accepted Answer

Strong form

Question 39

Involves periodically buying/selling assets in a portfolio to maintain desired asset allocation

Accepted Answer

Rebalancing

Question 40

A type of fund that typically purchases stocks and holds them for 2-3 years, then liquidates

Accepted Answer

Unit investment trusts (and they should be avoided)

Question 41

An attempt to outperform the market via selecting individual securities, market timing, or both

Accepted Answer

active investment management

Question 42

When stocks are chosen to be included in a portfolio due to low p/b, p/e, p/cf, or p/s ratios

Accepted Answer

Price factor

Question 43

Idea that risk-averse investors seek to optimize expected return based on a given level of risk

Accepted Answer

Modern Portfolio Theory

Question 44

A document that outlines the goals and objectives of a client and an investment strategy

Accepted Answer

Investment Policy Statement

Question 45

A mutual fund that tracks an index of securities, rather than engaging in security selection

Accepted Answer

Passively managed fund

Question 46

These U.S. Treasury notes and bonds have an interest rate that adjusts with inflation

Accepted Answer

TIPS

Question 47

a pool of funds collected from many investors for purpose of investing in stocks, bonds, etc

Accepted Answer

Mutual fund

Question 48

A client's willingness to take on risk

Accepted Answer

risk tolerance

Question 49

Stocks that outperformed the market over the past 9-12 months typically continue for next 3 months

Accepted Answer

Momentum

Question 50

set of optimal portfolios that offers highest expected return for a defined level of risk

Accepted Answer

Portfolios along the efficient frontier

FIN 331 Final Exam Practice Questions Set #1

Questions 50

FIN 331 Final Exam Practice Questions Set #1

Questions 50