Asset Class
Which of the following are mainstream assets?
Bond, equities
Which of the following statements is true?
Credit spreads on risky bonds appear to be higher than would be suggested if they were simply equal to expected default losses.
Which of the following assets is a "store of value" asset?
Gold
Which of the following would typically be considered an alternative asset?
Gold
Which of the following statements is true?
Most real estate investment is in the form of real estate investment trusts (REITs).
Which of the following is a typical characteristic of alternative assets?
Opportunity to achieve higher returns
What provisions allow bondholders to redeem their bonds early.
Put
Which of the following statements is true?
Sharpe ratios do not apply to a riskless investment.
Simple modern portfolio theory assumes that returns above the riskless rate can be explained with reference to a single market risk factor. The Fama-French model adds two other factors. What are they?
Size and value
Which of the following statements is true?
Some analysts consider that illiquidity generates excess returns for an asset.
Enormobank Investment Management forecast ERP using a Gordon growth DDM that equates earnings growth with dividend growth. Given a current dividend yield of 2%, expected long-term government bond yields of 1.5%, and expected earnings growth of 3%, what is the ERP (relative to bonds)?
The ERP is calculated as follows: ERP = DY + g - y = 2% + 3% - 1.5% = 3.5%
Which of the following statements is true?
The Sharpe ratio is widely used as a measurement of risk-adjusted return.
Which of the following statements is true?
The price performance of a cyclical share is usually particularly sensitive to expected changes in economic activity.
The Pseudoslavian stock market has an average P/E ratio of 20, and an average dividend yield of 2.5%. The shares of Pseudoslavia Bank trade at a price of PSD 20 (20 Pseudoslavian dollars). The P/E ratio is 16 and the dividend yield is 4%. What type of stock would Pseudoslavia Bank be considered to be?
Value stock
capital
debt and equity
consumption
raw materials, not held for investments, consumed during production
store of value
sored, retrieved and exchanged overtime
Which of the following cash investments would typically carry the lowest credit risk?
t-bills
A portfolio has annual expected return of 5% and a volatility of 8%. The risk-free rate is 1%.
5-1/8 = 0.5
Which of the following best describes survivorship bias?
A distortion in the interpretation of historical data caused by an assumption that the historical performance of particular investments in a market is equivalent to the historical returns for investors in that market
asset class
A group of investments with similar characteristics.
