FIN multiple choice

Investors' Choice Fund had NAV per share of $37.25 on January 1, 2012. On December 31 of the same year the fund's rate of return for the year was 17.3%. Income distributions were $1.14, and the fund had capital gain distributions of $1.35. Without considering taxes and transactions costs, what ending NAV would you calculate for Investors' Choice?

$41.20

Suppose you observe the following situation: Security Beta​ Expected Return Pete Corp. 0.8 0.12​ Repete Corp. 1.1 0.16 Assume these securities are correctly priced. Based on CAPM, what is the return on the market?

14.67 percent

Creditors would prefer

2 and 3 (2: a quick ratio of 1.2 to a quick ratio of 0.8. And 3: days sales outstanding of 35 to a days sales outstanding of 46)

An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the capital market line (CML) must:

Borrow some money at the risk-free rate and invest in the optimal risky portfolio

According to the Capital Asset Pricing Model (CAPM), which one of the following statements is false?

Expected return on a security increases in direct proportion to a decrease in the risk-free rate.

You buy a REIT for $50 a share. The REIT distributes $3.00 consisting of return of capital. You are in the 30% income tax bracket (which also applies to short-term capital gains) and the 15 percent long-term capital gains bracket. What is the tax implication of this distribution?

No tax is imposed when $3.00 return of capital is distributed

Which one of the following statements is wrong?

Returns on ETFs (exchange-traded funds) are determined based on their net asset values

Risk-adjusted performance of undiversified portfolios can be measured by

Sharpe index

Which one of the following statements is false?

The date of record is earlier than the ex-dividend date.

Money market mutual funds invest in

all of the above (commercial paper, negotiable certificates of deposit, treasury bills)

In a multi-factor APT model, a __________ portfolio is a well-diversified portfolio constructed to beta of 1 on one of the factors and a beta of 0 on any other level.

factor

Your opinion is that security C has an expected rate of return of 0.106. It has a beta of 1.1. The risk-free rate is 0.04 and the market expected rate of return is 0.10. According to the Capital Asset Pricing Model, this security is

fairly priced

a real estate investment trust

invests in mortgages or rental properties

a hedge fund

is open to a select number of individual investors

Pre-emptive rights offering permits to stockholders

maintain the proportionate share of ownership

Unsystematic risk is

reduced through diversification

An index fund limits its portfolio to

stocks included in an aggregate measure of stock prices

Inventory turnover may decrease if

the firm increases its inventory

Beta coefficients of 1.3 indicate

the stock is more volatile than the market