FIN 300 || 100% Accurate Answers.
Accounting profits is the most relevant variable the financial manager uses to measure returns.
correct answers False
The expected rate of return from an investment is equal to the expected cash flows divided by the
initial investment. correct answers True
Another name for an asset's expected rate of return is
holding−period
return. correct answers False
The
risk−return
trade−off
that investors face on a
day−to−day
basis is based on realized rates of return because expected returns involve too much uncertainty.
correct answers False
The relevant variable a financial manager uses to measure returns is correct answers cash flows.
Variation in the rate of return of an investment is a measure of the riskiness of that investment.
correct answers True
For a
well−diversified
, investor, an investment with an expected return of 10% with a standard deviation of 3%
dominates an investment with an expected return of 10% with a standard deviation of 5%.
correct answers False
Investment A and Investment B both have the same expected return, but Investment A is more
risky than Investment B. In the technical jargon of modern portfolio theory, Investment A is said
to "dominate" Investment B. correct answers False
Historically, investments with the highest returns have the lowest standard deviations because
investors do not like risk. correct answers False
Negative historical returns are not possible during periods of high volatility (high standard
deviations of returns) due to the
risk−return
trade−off. correct answers False
Of the following different types of securities, which is typically considered most risky? correct
answers common stocks of small companies
If you were to use the standard deviation as a measure of investment risk, which of the following
has historically been the least risky investment? correct answers U.S. Treasury bills
The benefits of diversification occur as long as the investments in a portfolio are not perfectly
positively correlated. correct answers True
A stock with a beta of 1 has systematic or market risk equal to the "typical" stock in the
marketplace. correct answers True
Asset allocation is not recommended by financial planners because mixing different types of
assets, such as stocks with bonds, makes it more difficult to track performance and adjust
portfolios to changing market conditions. correct answers False
Accounting profits is the most relevant variable the financial manager uses to measure returns.
correct answers False
The expected rate of return from an investment is equal to the expected cash flows divided by the
initial investment. correct answers True
Another name for an asset's expected rate of return is
holding−period
return. correct answers False
The
risk−return
trade−off
that investors face on a
day−to−day
basis is based on realized rates of return because expected returns involve too much uncertainty.
correct answers False
The relevant variable a financial manager uses to measure returns is correct answers cash flows.
Variation in the rate of return of an investment is a measure of the riskiness of that investment.
correct answers True
For a
well−diversified
, investor, an investment with an expected return of 10% with a standard deviation of 3%
dominates an investment with an expected return of 10% with a standard deviation of 5%.
correct answers False
Investment A and Investment B both have the same expected return, but Investment A is more
risky than Investment B. In the technical jargon of modern portfolio theory, Investment A is said
to "dominate" Investment B. correct answers False
Historically, investments with the highest returns have the lowest standard deviations because
investors do not like risk. correct answers False
Negative historical returns are not possible during periods of high volatility (high standard
deviations of returns) due to the
risk−return
trade−off. correct answers False
Of the following different types of securities, which is typically considered most risky? correct
answers common stocks of small companies
If you were to use the standard deviation as a measure of investment risk, which of the following
has historically been the least risky investment? correct answers U.S. Treasury bills
The benefits of diversification occur as long as the investments in a portfolio are not perfectly
positively correlated. correct answers True
A stock with a beta of 1 has systematic or market risk equal to the "typical" stock in the
marketplace. correct answers True
Asset allocation is not recommended by financial planners because mixing different types of
assets, such as stocks with bonds, makes it more difficult to track performance and adjust
portfolios to changing market conditions. correct answers False
