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FIN-350 CH 9-11.1 Quiz Flashcards | StudBud
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FIN-350 CH 9-11.1 Quiz
FIN-350 CH 9-11.1 Quiz
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Answers
1
True or False: Restricted stock is another term for executive stock options
True
False
2
In the CAPM formula, market risk premium is represented by...
RM - Rf
beta * (RM - Rf)
standard deviation x RM
Rf - RM
3
Which of the following is the least risky?
Stocks
Treasury bills
Corporate bonds
Long-term Treasury bonds
4
For the win... Investor seek
the highest possible risk for the lowest return
the lowest risk for the lowest return
the lowest return for a level of risk
the highest possible return for a level of risk
5
Efficient portfolios are the set of portfolios with the highest return for each risk level.
True
False
6
The returns of which of the following assets can be used as the risk-free rate?
The most recent inflation rate
Corporate bonds
Treasury bills and bonds
Preferred stock
7
For an investment, the
average return
tells us...
what the investor will earn each year
future risk
the overall past performance
the overall past risk
8
Diversification can reduce...
market risk
returns
nondiversifiable risk
diversifiable risk
9
The weighed average cost of capital (WACC) includes the component costs of...
government subsidies and Christmas bonuses
equity, preferred stock, and debt
equity and stock options
restricted stock and penny stocks
10
The strong form of the Efficient Market Hypothesis puts forth that which of the following is included in stock prices?
all of the above
historical volume and prices
current public information
privately held company information
11
Which of the following will have the most diversifiable risk?
the Dow Jones Industrial Average
a bond fund
a single stock
the S&P 500
12
Which of the following is FALSE about total risk of a company?
It is lower for firms with various lines of business.
It is not related to return.
It can change over time.
It can be measured by the standard deviation.
13
Inflation, interest rates, and economic growth relate to...
diversifiable risk
standard deviation
firm-specific risk
market risk
14
Another term for diversifiable risk is...
firm-specific risk
nondiversifiable risk
perfect correlation
market risk
15
The market risk premium
is the penalty for taking on firm-specific risk
is the reward for taking on systematic risk
is a measure of annual inflation
will discourage people from investing in stocks
16
The weighted average cost of capital can be used by a company to do all of the following EXCEPT...
compute the company's cost of capital
decide which projects to pursue
determine the book value of the company
increase shareholder value
17
Financial leverage is
the use of physical assets as collateral
the use of savings to invest
the use of debt to invest
18
What is the definition of Modern Portfolio Theory
The most up to date investments in a portfolio.
The portion of a portfolio that utilizes the newest stock offerings.
The concept of combining securities into a portfolio to minimize risk.
The concept of combining securities into a portfolio to maxamixe returns.
19
Another name for market risk is ...
Averaged risk
Weighted risk
Diversifiable risk
Nondiversifiable risk
20
An investor's optimal portfolio is one that provides...
the lowest return for the highest risk
the highest expected return for a given risk level
the lowest expected return for a given risk level
