Question:

The chance of loss due to fluctuations in the stock market is:

A.

market risk.

B.

interest rate risk.

C.

business risk.

D.

inflation risk.

Answer» b. interest rate risk.

Question:

An example of a depreciable asset is

A.

Land

B.

Cash

C.

Accounts receivable

D.

Equipment

Answer» d. Equipment

Question:

Under the Economic Growth and Tax Reconciliation Act of 2001, when will estate taxes be eliminated?

A.

2008

B.

2009

C.

2010

D.

2019

Answer» d. 2019

Question:

Exposure indicates

A.

Sensitivity to changes in risk

B.

Sensitivity to changes in asset prices

C.

Sensitivity to changes in portfolio

D.

Sensitivity to changes in assets

Answer» d. Sensitivity to changes in assets

Question:

Because most investors are risk averse

A.

The riskier the investment, the more the investor will pay for it

B.

The riskier the investment, the less compensation the investor requires

C.

Only financial institutions invest in risky assets

D.

They will require a higher rate of return for a riskier investment

Answer» d. They will require a higher rate of return for a riskier investment

Question:

Expected value is the:

A.

Inverse of the standard deviation

B.

Correlation between security’s risk and return

C.

Weighted average of all possible outcomes

D.

Same as the discrete probability distribution

Answer» c. Weighted average of all possible outcomes

Question:

Which of the following statements is/are true with respect Capital Market Line (CML)?I. It is the line passing from risk-free rate through market portfolio. II. The slope of CML is called market price of risk. III. CML fails to express equilibrium pricing relationship between expected return and standard deviation for all efficient portfolios lying along the line.

A.

Only (I) above

B.

Only (II) above

C.

Only (III) above

D.

Both (I) and (II) above

Answer» d. Both (I) and (II) above

Question:

In the stock-price beta estimation for the Coca-Cola Company, the dependent variable is the:

A.

return on Coca-Cola.

B.

price of Coca-Cola stock.

C.

return on the S&P 500.

D.

value of the S&P 500 Index.

Answer» d. value of the S&P 500 Index.

Question:

An efficient market reflects:

A.

past, current and inferred information.

B.

future information.

C.

past and current information.

D.

current and inferred information.

Answer» a. past, current and inferred information.

Question:

Empirical research concludes that betas for:

A.

individual securities and large portfolios are unstable.

B.

individual securities and large portfolios are stable.

C.

large portfolios are unstable.

D.

individual securities are unstable.

Answer» a. individual securities and large portfolios are unstable.