450 final exam

Suppose that you currently hold GE in your portfolio. You are considering adding either MMM or F. Both MMM and F have the same expected return and the same standard deviation. MMM has a correlation with GE of 0.00 and F has a correlation with WMT of -0.30. Which stock should you add to your portfolio?

MMM F****** neither, both have correlations that are not positive it doesn't matter because the stocks have the same expected return and standard deviation

Which one of the following categories of securities had the highest average annual return for the period 1926-2019?

U.S. Treasury bills Large-company stocks Small-company stocks****** Correct Long-term corporate bonds Long-term government bonds

Wright Market Research is able to borrow money at a rate of 6.8 percent per year. This interest rate is called the:

compound rate. current yield. cost of debt.****** capital gains yield. cost of capital.

In a well diversified portfolio, the type of risk elimated is

market risk beta unsystematic risk*** systematic risk

The cost of preferred stock is equivalent to the:

pretax cost of debt. rate of return on an annuity. aftertax cost of debt. rate of return on a perpetuity***** cost of an irregular growth common stock.

Efficient financial markets fluctuate continuously because:

the markets are continually reacting to old information as that information is absorbed. the markets are continually reacting to new information**. arbitrage trading is limited. current trading systems require human intervention. investments produce varying levels of net present values.

In theory, beta measures

the risk-free return firm-specific risk systematic risk***** unsystematic risk

Inside information has the least value when financial markets are:

weak form efficient. semiweak form efficient. semistrong form efficient. strong form efficient.******* Correct inefficient.

Assume all stock prices fairly reflect all of the available information on those stocks. Which one of the following terms best defines the stock market under these conditions?

Riskless market Evenly distributed market Zero volatility market Blume's market Efficient capital market*******