Fundamentals of Corporate Finance 12th Edition Ross 9781259918957 | All Chapters with Answers and Rationals

Test Bank For Fundamentals of Corporate Finance 12th Edition
Ross 9781259918957 | All Chapters with Answers and
Rationals


Which of the following portfolios has the least risk?


A. A portfolio of Treasury bills
B. A portfolio of long-term U.S. government bonds
C. A portfolio of U.S. common stocks of small firms
D. A portfolio of U.S. common stocks of large firms - ANSWER: A. a portfolio of treasury bills

For long-term U.S. government bonds, which risk concerns investors the most?


A.
Interest rate risk


B.
Default risk


C.
Market risk


D.
Liquidity risk - ANSWER: A. Interest rate risk

What has been the average annual rate of interest on Treasury bills over the past 111 years (1900 to
2011)?


A.
Less than 2%


B.
Between 2% and 3%


C.
Between 3% and 4%


D.
Greater than 4% - ANSWER: A. less than 2%

What has been the average annual nominal rate of interest on Treasury bills over the past 111 years?

,A.
Less than 1%


B.
Between 1% and 2%


C.
Between 2% and 3%


D.
Greater than 3% - ANSWER: D. greater than 3%

What has been the average nominal rate of return on a portfolio of US common stocks over the past
111 years (from 1900 to 2011)


A.
Less than 2%


B.
Between 2% and 5%


C.
Between 5% and 11%


D.
Greater than 11% - ANSWER: D. greater than 11%

One dollar invested in a portfolio of long-term US government bonds in 1900 would have grown in
nominal value by the end of year 2011 to:

A.
$719


B.
$66


C.
$74


D.
$245 - ANSWER: D. $245

One dollar invested in a portfolio of U.S. common stocks in 1900 would have grown in nominal value
by the end of year 2011:

A.
$21,978

,B.
$245


C.
$74


D.
$6 - ANSWER: A. $21, 978

What has been the average annual rate of return in real terms for portfolio of US common stocks
between 1900 and 2011?


A.
Less than 2%


B.
Between 2% and 5%


C.
Between 5% and 8%


D.
Greater than 8% - ANSWER: d. Greater than 8%

Which portfolio has had the lowest average annual nominal rate of return during the 1900-2011
periods?

A.
Portfolio of small U.S. common stocks


B.
Portfolio of U.S. government bonds


C.
Portfolio of Treasury bills


D.
Portfolio of large U.S. common stocks - ANSWER: C. Portfolio of Treasury bills

Which portfolio had the highest average annual return in real terms between 1900 and 2011?

A.
Portfolio of U.S. common stocks


B.

, Portfolio of U.S. government bonds


C.
Portfolio of Treasury bills


D.
None of the answers - ANSWER: A. Portfolio of US common stocks

A standard error measures:

A.
nominal annual rate of return on a portfolio


B.
risk of a portfolio


C.
reliability of an estimate


D.
real annual rate of return on a portfolio - ANSWER: C. reliability of an estimate

Which of the following is an estimate of standard error?

A.
The average annual rate of return divided by the square root of the number of observations


B.
The variance divided by the number of observations


C.
The standard deviation of returns divided by the square root of the number of observations


D.
The variance of returns divided by the square root of the number of observations - ANSWER: C. the
standard deviation of returns divided by the square root of the number of observations

Which portfolio has had the highest average risk premium during the period 1900-2011?

A.
Common stocks


B.
Government bonds


C.
Treasury bills