Investments Finals
27. What is a difference between an option and a warrant? A. Most options are written by the company that issues the underlying stock B. Most warrants are written by third parties C. Options must be registered with the Federal Reserve Board D. Warrants are exempt from capital gains taxes E. None of the above
E. None of the above
16. Beta is a measure of security responsiveness to _________. A. firm-specific risk B. diversifiable risk C. inflation risk D. unique risk E. none of the above
E. none of the above
32. According to the capital asset pricing model, fairly priced securities have _________. A. negative betas B. positive alphas C. positive betas D. zero alphas E. none of the above
E. none of the above
11. __________ are examples of synthetically created zero-coupon bonds. A. COLTS B. OPOSSMS C. STRIPS D. ARMs E. None of the above
C. STRIPS
24. What is the standard deviation of a portfolio of two stocks given the following data: Stock A has a standard deviation of 30%. Stock B has a standard deviation of 18%. The portfolio contains 60% of stock A, and the correlation coefficient between the two stocks is -1. A. 0% B. 10.8% C. 18% D. 24% E. none of the above
B. 10.8%
10. You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40%, respectively. X has an expected rate of return of 14%, and Y has an expected rate of return of 10%. If you decide to hold 25% of your complete portfolio in the risky portfolio and 75% in the Treasury bills, then the dollar values of your positions in X and Y, respectively, would be __________ and _________. A. $150; $100 B. $300; $400 C. $100; $150 D. $450; $300 E. None of the above
A. $150; $100
38. The purpose of a currency swap is to A. Allow someone to hedge foreign exchange risk B. Avoid interest rate fluctuations C. Provide foreign currencies for travelers D. Provide new varieties for banknote collectors E. None of the above
A. Allow someone to hedge foreign exchange risk
22. You invest in the stock of Rayleigh Corp. and write a call option on Rayleigh Corp. This strategy is called a _________. A. Covered call B. Long straddle C. Naked call D. Money spread E. None of the above
A. Covered call
12. Suppose you have two portfolios, X and Y. We can say that X dominates Y by the mean-variance criterion if A. Expected return of X is equal to Y and standard deviation of X is less than Y B. Expected return of X is greater than Y and standard deviation of X is greater than Y C. Expected return of X is less than Y and standard deviation of X is less than Y D. Expected return of X is less than Y and standard deviation of X is equal to Y E. None of the above
A. Expected return of X is equal to Y and standard deviation of X is less than Y
1. The ___________ is the document that defines the contract between the bond issuer and the bondholder. A. Indenture B. Covenant agreement C. Trustee agreement D. Collateral statement E. None of the above
A. Indenture
5. The primary difference between Treasury notes and bonds is ________. A. Maturity at issue B. Default risk C. Coupon rate D. Tax status E. None of the above
A. Maturity at issue
10. Which of the following is an example of systematic risk for a company? A. Severe recession B. Poor customer relations C. Employee theft of inventory D. Poor quality control E. All of the above
A. Severe recession
8. Under the expectations hypothesis, if the yield curve is upward sloping, then A. The market must expect an increase in short-term interest rates B. The market expects no change in short-term interest rates C. The market expects a decrease in short-term interest rates D. The market's expectations about short-term interest rates are uncertain E. None of the above
A. The market must expect an increase in short-term interest rates
35. Which of the following are true about put options on two different stocks that are identical except for their betas? The firms have equivalent firm-specific risk. A. The put on the higher beta stock will be worth more B. The put on the lower-beta stock will be worth more C. The puts on the two stocks will have equal value D. Not enough information to answer E. None of the above
A. The put on the higher beta stock will be worth more
23. You buy a call option on Summit Corp. with an exercise price of $40 and an expiration date in September, and you write a call option on Summit Corp. with an exercise price of $40 and an expiration date in October. This strategy is called a _________. A. Time spread B. Long straddle C. Short straddle D. Money spread E. None of the above
A. Time spread
29. If enough investors decide to purchase stocks, they are likely to drive up stock prices, thereby causing _____________ and ___________. A. expected returns to fall; risk premiums to fall B. expected returns to rise; risk premiums to fall C. expected returns to rise; risk premiums to rise D. expected returns to fall; risk premiums to rise E. none of the above
A. expected returns to fall; risk premiums to fall
17. Market risk is also called __________ and _________. A. systematic risk; nondiversifiable risk B. systematic risk; diversifiable risk C. unique risk; nondiversifiable risk D. unique risk; diversifiable risk E. None of the above
A. systematic risk; nondiversifiable risk
41. If the U.S. capital markets are not informationally efficient, ______. A. the markets cannot be allocationally efficient B. systematic risk does not matter C. no type of analysis can be used to generate abnormal returns D. returns must follow a random walk E. none of the above
A. the markets cannot be allocationally efficient
17. You purchase one MBI July 120 call contract (equaling 100 shares) for a premium of $5 per share. You hold the option until the expiration date, when MBI stock sells for $123 per share. You will realize a ______ on the investment. A. $200 profit B. $200 loss C. $300 profit D. $300 loss E. None of the above
B. $200 loss
6. What interest rate do financial economists primarily use as the risk-free rate? a. The rate on home mortgages b. The rate on Treasury bills c. The rate on commercial paper d. The rate on bank CDs e. None of the above
b. The rate on Treasury bills
8. Consider the following two investment alternatives: First, a risky portfolio that pays a 15% rate of return with a probability of 40% or a 5% rate of return with a probability of 60%. Second, a Treasury bill that pays 6%. The risk premium on the risky investment is _________. A. 1% B. 3% C. 6% D. 9% E. None of the above
B. 3%
41. Violation of the spot-futures parity relationship results in _______________. A. Fines and other penalties imposed by the SEC B. Arbitrage opportunities for investors who spot them C. Suspension of delivery privileges D. Suspension of trading E. None of the above
B. Arbitrage opportunities for investors who spot them
2. Which of the following rates represents a bond's annual interest payment per dollar of par value? A. Holding period return B. Coupon rate C. Internal Rate of Return D. Yield to Maturity E. None of the above
B. Coupon rate
37. Futures contracts have many advantages over forward contracts except that A. Futures positions are easier to trade B. Futures contracts are tailored to the specific needs of the investor C. Futures trading preserves the anonymity of the participants D. Counterparty credit risk is not a concern on futures E. All of the above are advantages of futures contracts
B. Futures contracts are tailored to the specific needs of the investor
11. You invest all of your money in 1-year T-bills. Which of the following statements is (are) correct? I. Your nominal return on the T-bills is riskless. II. Your real return on the T-bills is riskless. III. Your real return is uncertain A. I only B. I and III only C. II only D. I, II, and III E. None of the above
B. I and III only
26. Which of the following are assumptions of the simple CAPM model? I. Individual trades of investors do not affect a stock's price. II. All investors plan for one identical holding period. III. All investors analyze securities in the same way and share the same economic view of the world. IV. All investors have the same level of risk aversion. A. I, II, and IV only B. I, II, and III only C. II, III, and IV only D. I, II, III, and IV E. None are true
B. I, II, and III only
25. Fama and French claim that after controlling for firm size and the ratio of the firm's book value to market value, beta is: I. Highly significant in predicting future stock returns II. Relatively useless in predicting future stock returns III. A good predictor of the firm's specific risk A. I only B. II only C. I and III only D. I, II, and III E. None of the above
B. II only
14. A major drawback of the theory behind the Capital Allocation Line (CAL) is: A. It assumes there is no risk-free rate B. It assumes the investor can both lend and borrow at the risk-free rate C. It assumes the government cannot borrow at the risk-free rate D. It assumes only corporations can lend at the risk-free rate E. All of the above
B. It assumes the investor can both lend and borrow at the risk-free rate
30. Which venue trades the most liquid options? A. Over the Counter B. Option exchanges C. The Federal Reserve D. TreasuryDirect.gov E. None of the above
B. Option exchanges
2. The holding period return on a stock is equal to _________. A. The capital gain yield over the period plus the inflation rate B. The capital gain yield over the period plus the dividend yield C. the current yield plus the dividend yield D. the dividend yield plus the risk premium E. None of the above
B. The capital gain yield over the period plus the dividend yield
36. If the time to expiration for a put option falls and the price of the put rises, what has happened to the put option's implied volatility, holding all else equal? A. The implied volatility has fallen B. The implied volatility has risen C. The implied volatility stayed the same D. Not enough information to answer E. None of the above
B. The implied volatility has risen
32. Why does an increase in the volatility of an asset increase the value of a put or call on the asset? A. The increase in volatility decreases the discount rate for NPV computations B. The increase in volatility increases the probability that an option will be in the money C. Increases in volatility do not increase the value of puts D. The increase in volatility increases the risk free rate E. None of the above
B. The increase in volatility increases the probability that an option will be in the money
4.The rate of return on _____ is known at the beginning of the holding period, while the rate of return on ____ is not known until the end of the holding period. A. risky assets; Treasury bills B. Treasury bills; risky assets C. excess returns; risky assets D. index assets; bonds E. None of the above
B. Treasury bills; risky assets
14. Consider the liquidity preference theory of the term structure of interest rates. On average, one would expect investors to require _________. A. a higher yield on short-term bonds than on long-term bonds B. a higher yield on long-term bonds than on short-term bonds C. the same yield on both short-term bonds and long-term bonds D. All of the above E. None of the above
B. a higher yield on long-term bonds than on short-term bonds
19. The writer of a put option _______________. A. agrees to sell shares at a set price if the option holder desires B. agrees to buy shares at a set price if the option holder desires C. has the right to buy shares at a set price D. has the right to sell shares at a set price E. None of the above
B. agrees to buy shares at a set price if the option holder desires
36. The semistrong form of the EMH states that ________ must be reflected in the current stock price. A. all security price and volume data B. all publicly available information C. all information, including inside information D. all costless information E. none of the above
B. all publicly available information
34. The risk-free rate is 4%. The expected market rate of return is 11%. If you expect stock X with a beta of .8 to offer a rate of return of 12%, then you should _________. A. buy stock X because it is overpriced B. buy stock X because it is underpriced C. sell short stock X because it is overpriced D. sell short stock X because it is underpriced E. None of the above
B. buy stock X because it is underpriced
21. A put option on Dr. Pepper Snapple Group, Inc., has an exercise price of $45. The current stock price is $41. The put option is _________. A. at the money B. in the money C. out of the money D. knocked out E. None of the above
B. in the money
19. Rational risk-averse investors will always prefer portfolios _____________. A. located on the efficient frontier to those located on the capital market line B. located on the capital market line to those located on the efficient frontier C. at or near the minimum-variance point on the efficient frontier D. that are risk-free to all other asset choices E. none of the above
B. located on the capital market line to those located on the efficient frontier
33. The possibility of arbitrage arises when ____________. A. there is no consensus among investors regarding the future direction of the market, and thus trades are made arbitrarily B. mispricing among securities creates opportunities for riskless profits C. two identically risky securities carry the same expected returns D. investors do not diversify E. none of the above
B. mispricing among securities creates opportunities for riskless profits
15. Diversification is most effective when security returns are _________. A. high B. negatively correlated C. positively correlated D. uncorrelated E. None of the above
B. negatively correlated
40. Fundamental analysis is likely to yield best results for _______. A. NYSE stocks B. neglected stocks C. stocks that are frequently in the news D. fast-growing companies E. all of the above
B. neglected stocks
3. The excess return is the _________. A. rate of return that can be earned with certainty B. rate of return in excess of the Treasury-bill rate C. rate of return to risk aversion D. index return E. None of the above
B. rate of return in excess of the Treasury-bill rate
6. Both investors and gamblers take on risk. The difference between an investor and a gambler is that an investor _______. A. is normally risk neutral B. requires a risk premium to take on the risk C. knows he or she will not lose money D. knows the outcomes at the beginning of the holding period E. All of the above
B. requires a risk premium to take on the risk
39. Choosing stocks by searching for predictable patterns in stock prices is called ________. A. fundamental analysis B. technical analysis C. index management D. random-walk investing E. none of the above
B. technical analysis
8. Suppose that a stock portfolio and a bond portfolio have a zero correlation. This means that ______. A. the returns on the stock and bond portfolios tend to move inversely B. the returns on the stock and bond portfolios tend to vary independently of each other C. the returns on the stock and bond portfolios tend to move together D. the covariance of the stock and bond portfolios will be positive E. None of the above
B. the returns on the stock and bond portfolios tend to vary independently of each other
13. Which of the following statistics cannot be negative? A. covariance B. variance C. E(r) D. correlation coefficient E. All of the above can be negative
B. variance
34. Which of the following are true? A. American stock options on a stock are worth the same as European options if the stock pays a dividend B. American stock options on a stock are worth less than European options if the stock pays a dividend C. American options on a stock are worth the same as European options if the stock does not pay any dividend D. American options in a stock are worth less than European options if the stock does not pay a dividend E. None of the above
C. American options on a stock are worth the same as European options if the stock does not pay any dividend
31. How are stock index options settled? A. Purchase of offsetting futures contracts B. Delivery of all stocks in the index C. Cash D. Treasury Bills E. None of the above
C. Cash
15. The covariance between the returns of assets X and Y is negative. Which of the following is true? A. Correlation of returns of assets X and Y must be zero B. Correlation of returns of assets X and Y must be positive C. Correlations of returns of assets X and Y must be negative D. Both A and B E. None of the above
C. Correlations of returns of assets X and Y must be negative
4. Floating-rate bonds have a __________ that is adjusted with current market interest rates. A. Maturity date B. Coupon payment date C. Coupon rate D. Dividend yield E. None of the above
C. Coupon rate
9. In which one of the following cases is the bond selling at a discount? A. Coupon rate is greater than current yield, which is greater than yield to maturity. B. Coupon rate, current yield, and yield to maturity are all the same. C. Coupon rate is less than current yield, which is less than yield to maturity D. Coupon rate is less than current yield, which is greater than yield to maturity E. None of the above
C. Coupon rate is less than current yield, which is less than yield to maturity
1. Rank the following from highest average historical standard deviation to lowest average historical standard deviation from 1926 to 2013. I. Small stocks II. Long-term bonds III. Large stocks IV Treasury bills
C. I, III, II, IV
6. TIPS offer investors inflation protection by ______________ by the inflation rate each year. A. Increasing only the coupon rate B. Increasing only the par value C. Increasing both the par value and the coupon payment D. Increasing the promised yield to maturity
C. Increasing both the par value and the coupon payment
7. TIPS are an example of _______________. A. Eurobonds B. Convertible bonds C. Indexed bonds D. Catastrophe bonds E. None of the above
C. Indexed bonds
22. Which of the following provides the best example of a systematic-risk event? A. A strike by union workers hurts a firm's quarterly earnings. B. Mad Cow disease in Montana hurts local ranchers and buyers of beef. C. The Federal Reserve increases interest rates 50 basis points. D. A senior executive at a firm embezzles $10 million and escapes to South America. E. All of the above
C. The Federal Reserve increases interest rates 50 basis points.
28. If you own a call option on a Treasury bond then, holding all else equal, if the interest rates on similar maturity newly issued bonds increase A. The value of the option increases B. The value of the option stays the same C. The value of the option decreases D. Insufficient information E. None of the above
C. The value of the option decreases
37. Proponents of the EMH typically advocate __________. A. a conservative investment strategy B. a liberal investment strategy C. a passive investment strategy D. an active investment strategy E. none of the above
C. a passive investment strategy
38. The primary objective of fundamental analysis is to identify __________. A. well-run firms B. poorly run firms C. mispriced stocks D. high P/E stocks E. none of the above
C. mispriced stocks
21. Diversification can reduce or eliminate __________ risk. A. all B. systematic C. nonsystematic D. only an insignificant E. None of the above
C. nonsystematic
31. According to the capital asset pricing model, a security with a _________. A. negative alpha is considered a good buy B. positive alpha is considered overpriced C. positive alpha is considered underpriced D. zero alpha is considered a good buy E. none of the above
C. positive alpha is considered underpriced
16. You hold a subordinated debenture in a firm. In the event of bankruptcy you will be paid off before which one of the following? A. mortgage bonds B. senior debentures C. preferred stock D. equipment obligation bonds E. None of the above
C. preferred stock
12. A __________ bond gives the bondholder the right to cash in the bond before maturity at a specific price after a specific date. A. callable B. coupon C. puttable D. Treasury E. None of the above
C. puttable
42. The broadest information set is included in the _____. A. weak-form efficiency argument B. semistrong-form efficiency argument C. strong-form efficiency argument D. technical analysis trading method E. none of the above
C. strong-form efficiency argument
23. Which of the following correlation coefficients will produce the least diversification benefit? A. -0.6 B. -0.3 C. 0 D. 0.8 E. All produce equal diversification benefits
D. 0.8
27. Consider the CAPM. The risk-free rate is 6%, and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3? A. 6% B. 15.6% C. 18% D. 21.6% E. None of the above
D. 21.6%
18. ______ option can only be exercised on the expiration date. A. A Mexican B. An Asian C. An American D. A European E. None of the above
D. A European
12. Risk that can be eliminated through diversification is called A. Unique risk B. Firm-specific risk C. Diversifiable risk D. All of the above E. None of the above
D. All of the above
29. How are currency options structured? A. Puts and calls directly on some quantity of currency B. Puts and calls on futures contracts on the currency C. Futures contracts on puts and calls on the currency D. Both A and B E. None of the above
D. Both A and B
16. The Capital Allocation Line (CAL) will have its highest slope when it is A. Horizontal B. Intersecting the minimum variance risky portfolio C. Intersecting the all stocks portfolio D. Intersecting the optimal portfolio E. None of the above
D. Intersecting the optimal portfolio
39. The daily settlement of obligations on futures positions is called _____________. A. A margin call B. A variation margin check C. The initial margin requirement D. Marking to market E. None of the above
D. Marking to market
11. Which of the following are true? A. Both systematic risk and nonsystematic risk can be diversified away B. Neither systematic risk nor nonsystematic risk can be diversified away C. Systematic risk can be diversified away but nonsystematic risk can't D. Nonsystematic risk can be diversified away but systematic risk can't E. None of the above
D. Nonsystematic risk can be diversified away but systematic risk can't
7. The formula is used to calculate the _____________.
D. Sharpe measure
35. Which of the following beliefs would not preclude charting as a method of portfolio management? A. The market is strong-form efficient. B. The market is semistrong-form efficient. C. The market is weak-form efficient D. Stock prices follow recurring patterns. E. All of the above would preclude charting
D. Stock prices follow recurring patterns.
24. The Option Clearing Corporation is owned by _________. A. The Federal Deposit Insurance Corporation B. The Federal Reserve System C. Major U.S. banks D. The exchanges on which stock options are traded E. None of the above
D. The exchanges on which stock options are traded
26. The potential loss for a writer of a naked call option on a stock is _________. A. Equal to the call premium B. Larger the lower the stock price C. Limited D. Unlimited E. None
D. Unlimited
33. Which of the following statements about stock options is true? A. Value of of both puts and calls decrease as the interest rate increases B. Value of of both puts and calls increase as the interest rate increases C. Value of puts increases and value of calls decreases as the interest rate increases D. Value of puts decreases and value of calls increases as the interest rate increases E. None of the above
D. Value of puts decreases and value of calls increases as the interest rate increases
10. According to the liquidity preference theory of the term structure of interest rates, an increase in the yield on long-term corporate bonds versus short-term bonds could be due to _______. A. declining liquidity premiums B. an expectation of an upcoming recession C. a decline in future inflation expectations D. an increase in expected interest rate volatility E. None of the above
D. an increase in expected interest rate volatility
15. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $120 annually. Bond A will mature in 5 years, while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 14% A. both bonds will increase in value but bond A will increase more than bond B B. both bonds will increase in value but bond B will increase more than bond A C. both bonds will decrease in value but bond A will decrease more than bond B D. both bonds will decrease in value but bond B will decrease more than bond A E. None of the above
D. both bonds will decrease in value but bond B will decrease more than bond A
13. The bonds of Elbow Grease Dishwashing Company have received a rating of C by Moody's. The C rating indicates that the bonds are _________. A. high grade B. intermediate grade C. investment grade D. junk bonds E. None of the above
D. junk bonds
28. Empirical results estimated from historical data indicate that betas _________. A. are always close to zero B. are constant over time C. of all securities are always between zero and 1 D. seem to regress toward 1 over time E. none of the above
D. seem to regress toward 1 over time
14. The correlation coefficient between two assets equals _________. A. their covariance divided by the product of their variances B. the product of their variances divided by their covariance C. the sum of their expected returns divided by their covariance D. their covariance divided by the product of their standard deviations E. None of the above
D. their covariance divided by the product of their standard deviations
3. A debenture is _________. A. secured by other securities held by the firm B. secured by equipment owned by the firm C. secured by property owned by the firm D. unsecured E. None of the above
D. unsecured
20. The values of beta coefficients of securities are __________. A. always positive B. always negative C. always between positive 1 and negative 1 D. usually positive but are not restricted in any particular way E. none of the above
D. usually positive but are not restricted in any particular way
13. If an investor has two assets to pick from, there are benefits to buying both if A. The correlation coefficient is any amount greater than minus 1 B. The correlation coefficient is any amount less than minus 1 C. The covariance is greater than 100 D. The covariance is greater than 1000 E. None of the above
E. None of the above
17. Another term for systematic risk is: A. Firm-Specific risk B. Diversifiable risk C. Idiosyncratic risk D. All of the above E. None of the above
E. None of the above
25. The maximum loss a buyer of a stock call option can suffer is the _________. A. Put premium B. Stock price C. Stock price minus the value of the call D. Strike price minus the stock price E. None of the above
E. None of the above
30. The market portfolio has a beta of _________. A. -1 B. 0 C. 0.5 D. 1.5 E. None of the above
E. None of the above
40. An investor would want to __________ to exploit an expected fall in interest rates. ] A. Sell S&P 500 Index futures B. Sell Treasury-bond futures C. Buy put options on Treasury-bond futures contracts D. Buy wheat futures E. None of the above
E. None of the above
5. Your investment has a 20% chance of earning a 30% rate of return, a 50% chance of earning a 10% rate of return, and a 30% chance of losing 6%. What is your expected return on this investment? A. 12.8% B. 11% C. 8.5% D. 2.9% E. None of the above
E. None of the above
9. You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 21% and a Treasury bill with a rate of return of 5%. How much money should be invested in the risky asset to form a portfolio with an expected return of 11%? A. $8,000 B. $4,000 C. $7,000 D. $3,000 E. None of the above
E. None of the above
20. Advantages of exchange-traded options over OTC options include all but which one of the following? A. ease and low cost of trading B. anonymity of participants C. options clearing corporation is a party to both sides of the transaction D. no concerns about counterparty credit risk E. all of the above are advantages of exchange-traded options
E. all of the above are advantages of exchange-traded options
5. If you are extremely risk averse, then which of the following are true? a. You will require a very high risk premium to entice you to make a very risky investment b. You will require a very low (but positive) risk premium to entice you to make a very risky investment c. You will insist on zero risk premium to entice you to make a very risky investment d. You will insist on a negative risk premium to entice you to make a very risky investment e. none of the above
a. You will require a very high risk premium to entice you to make a very risky investment
9. If returns on a security are normally distributed, what are the only two parameters we need to know about its probability distribution? a. Mean and skewness b. Mean and variance c. Skewness and kurtosis d. Variance and skewness e. All of the above
b. Mean and variance
1. You buy some shares of a stock on June 30, 2008 for $3,000 and sell it on June 30, 2016 for $7,142. Assume you did not pay any commissions and the stock did not pay any dividends. What is your annual arithmetic average return, your annual geometric average return, and your annual continuously compounded return? Round to the nearest tenth of a percent. a. 17.3%, 10.8%, 11.5% b. 10.8%, 11.5%, 17.3% c. 11.5%, 17.3%, 10.8% d. 17.3%, 11.5%, 10.8% e. None of the above
d. 17.3%, 11.5%, 10.8%
8. How large is the expected risk premium on a gamble at a casino? a. Larger than the typical stock risk premium b. Smaller than a stock risk premium, but still positive c. Zero d. Negative e. None of the above
d. Negative
4. The tails of the density function of a normally distributed random variable end at a. Plus and minus one standard deviation b. Plus and minus two standard deviations c. Plus and minus three standard deviations d. Positive and negative infinity e. None of the above
d. Positive and negative infinity
2. An investor's portfolio has an expected return of 15% for the next year. The current one year Treasury Bill rate is 3%. The portfolio has an annual variance of 6.25%. The portfolio's price of risk and Sharpe ratio are? Round to the nearest hundredth. a. 1.92, 0.32 b. 1.50, 1.96 c. 0.53, 0.48 d. Cannot determine from the information given e. None of the above
e. None of the above
3. Which of the following statements are true? a. The real interest rate is equal to the nominal interest rate, plus the inflation rate b. The nominal interest rate implies a very small interest rate at any time c. The inflation rate is equal to the real interest rate minus the Fed Funds rate d. The nominal interest rate plus the real interest rate equal equal the inflation rate e. None of the above
e. None of the above
7. What is kurtosis? a. An awful disease b. A measure of how a probability distribution is skewed to the left or right c. The probability that the mean equals the median d. The probability that a stock's beta equals zero e. None of the above
e. None of the above