FIN 301
FIN 301 EXAM QUESTIONS AND ANSWERS GRADED
A+.
low risk investments have... - correct answer lower expected returns
high risk investments have... - correct answer higher expected returns
the least risky investment - correct answer treasury bills
the riskiest investment - correct answer small company common stocks
price/return volatility is a way to measure? - correct answer risk
a rational investor requires a higher expected return to accept... - correct answer
additional risk
model that describes the tradeoff between risk and return... - correct answer
capital asset pricing model (CAPM)
,FIN 301
CAPM equation - correct answer = risk free rate + [Beta * (Market Risk Premium -
Return on Market)]
rate of return equation - correct answer = (cash pmt. + change in price) / price
paid
a capital gain/loss is realized when... - correct answer the asset is sold
risk is measured by... - correct answer the possible range of returns around an
expected return, known as the standard deviation
a greater the standard deviation of a stock means... - correct answer more
fluctuations and greater risk
simple averages can be misleading when... - correct answer analyzing returns
_______ or _______ averages are more representative of actual investment
performance - correct answer compound or geometric
simple averages are misleading because... - correct answer they can hide poor
performances
relationship between beta and return is... - correct answer positive
stock return estimate equation - correct answer = market return * beta
, FIN 301
beta is a measure of... - correct answer market magnification
systematic risk is measured by... - correct answer beta
the market related risk that you are paid to take is... - correct answer systematic
the risk that cannot be diversified away is... - correct answer systematic
the firm specific risk that affects the return of that firm or industry only is... -
correct answer unsystematic
the risk that can be diversified away is... - correct answer unsystematic
in a diversified portfolio, which risk averages out to be 0? - correct answer
unsystematic
which risk are you not paid to take? - correct answer unsystematic
alpha is a measure of... - correct answer performance
alpha equation - correct answer = observed return of asset - expected return of
asset
a positive alpha is... - correct answer good
FIN 301 EXAM QUESTIONS AND ANSWERS GRADED
A+.
low risk investments have... - correct answer lower expected returns
high risk investments have... - correct answer higher expected returns
the least risky investment - correct answer treasury bills
the riskiest investment - correct answer small company common stocks
price/return volatility is a way to measure? - correct answer risk
a rational investor requires a higher expected return to accept... - correct answer
additional risk
model that describes the tradeoff between risk and return... - correct answer
capital asset pricing model (CAPM)
,FIN 301
CAPM equation - correct answer = risk free rate + [Beta * (Market Risk Premium -
Return on Market)]
rate of return equation - correct answer = (cash pmt. + change in price) / price
paid
a capital gain/loss is realized when... - correct answer the asset is sold
risk is measured by... - correct answer the possible range of returns around an
expected return, known as the standard deviation
a greater the standard deviation of a stock means... - correct answer more
fluctuations and greater risk
simple averages can be misleading when... - correct answer analyzing returns
_______ or _______ averages are more representative of actual investment
performance - correct answer compound or geometric
simple averages are misleading because... - correct answer they can hide poor
performances
relationship between beta and return is... - correct answer positive
stock return estimate equation - correct answer = market return * beta
, FIN 301
beta is a measure of... - correct answer market magnification
systematic risk is measured by... - correct answer beta
the market related risk that you are paid to take is... - correct answer systematic
the risk that cannot be diversified away is... - correct answer systematic
the firm specific risk that affects the return of that firm or industry only is... -
correct answer unsystematic
the risk that can be diversified away is... - correct answer unsystematic
in a diversified portfolio, which risk averages out to be 0? - correct answer
unsystematic
which risk are you not paid to take? - correct answer unsystematic
alpha is a measure of... - correct answer performance
alpha equation - correct answer = observed return of asset - expected return of
asset
a positive alpha is... - correct answer good
