FINA 3315 (HW AND QUIZZES) – 260
QUESTIONS AND VERIFIED
ANSWERS
Stocks are a(n) ________ investment representing ________ of a business -
ANSWER direct; ownership
The government is generally - ANSWER A demander of funds in the financial
market.
In selecting investments consistent with your goals, you should consider -
ANSWER risks, returns, and taxes.
A major goal of corporate financial management is to increase the firm's value
to investors. - ANSWER True
The governmental agency that oversees the capital markets is the - ANSWER
Securities and Exchange Commission.
Stocks purchased in the secondary market are purchased - ANSWER from
other investors.
Market makers in dealer markets - ANSWER buy securities at a bid price and
hope to resell them at a higher offer price.
Which of the following are correct statements concerning the NYSE?
I. Each stock has a designated location, called a post, at which its shares are
traded.
II. The NYSE is a dealer market.
III. Supply and demand determines the price of each security.
IV. A specialist buys and sells to maintain a market for a particular security. -
ANSWER I, III and IV only
,Since 1900, the average return on stocks has exceeded the average return on
savings accounts by more than 6 percentage points. - ANSWER True
Exchange traded funds are - ANSWER baskets of securities that trade like a
single stock.
Liquidity is the ability to convert an investment into cash quickly with little or
no loss of value. - ANSWER True
Margin trading will magnify losses on a percentage basis. - ANSWER True
Earning a high rate of return with little or no risk is a realistic investment goal. -
ANSWER False
On a net basis, funds in the financial markets are generally supplied by -
ANSWER Individuals
IPOs are relatively safe investments. - ANSWER False
Historically, what is the correct ranking of the following securities from lowest
rate of return to the
highest? - ANSWER Short−term government bills, long−term government
bonds, stocks.
The present value of $1,000 discounted at the rate of 5% per year, to be
received at the end of 3 years is equal to - ANSWER $1,000/(1.05)^3
If the present value of an investment's benefits equals the present value of the
investment's costs, then the investor would earn a - ANSWER return equal to
the discount rate.
Which one following will lower required rates of return? - ANSWER lower
rates of inflation
In some markets it may take many months to sell a residential property. This is
an example of - ANSWER liquidity risk.
Table 1
, AB
1 Year Cash Flow
2 1 $(5,000)
3 2 $4,000
4 3 $3,000
Given a spreadsheet similar to the one shown in Table 1, the command to
compute the internal rate of return would be
A) =RATE(3,B3,B4,B2).
B) =TVM(A2:B4).
C) =IRR(B3:B4)-B2.
D) =IRR(B2:B4). - ANSWER D) =IRR(B2:B4).
The efficient frontier - ANSWER represents the best attainable tradeoff
between risk and return.
Liquidity is best described as: - ANSWER converting an asset into cash
without much of a price concession.
Stocks A and B have standard deviations of
8%
and
15%
respectively. The correlation between the two stocks' returns has historically
been
0.35.
What is the standard deviation of a portfolio consisting of
60%
invested in Stock A and
40%
invested in Stock B? - ANSWER 8.90
Compound interest is interest paid not only on the initial investment but also on
any interest earned after the initial investment. - ANSWER True
Inflation tends to have a particularly negative impact on the price of -
ANSWER Bonds
QUESTIONS AND VERIFIED
ANSWERS
Stocks are a(n) ________ investment representing ________ of a business -
ANSWER direct; ownership
The government is generally - ANSWER A demander of funds in the financial
market.
In selecting investments consistent with your goals, you should consider -
ANSWER risks, returns, and taxes.
A major goal of corporate financial management is to increase the firm's value
to investors. - ANSWER True
The governmental agency that oversees the capital markets is the - ANSWER
Securities and Exchange Commission.
Stocks purchased in the secondary market are purchased - ANSWER from
other investors.
Market makers in dealer markets - ANSWER buy securities at a bid price and
hope to resell them at a higher offer price.
Which of the following are correct statements concerning the NYSE?
I. Each stock has a designated location, called a post, at which its shares are
traded.
II. The NYSE is a dealer market.
III. Supply and demand determines the price of each security.
IV. A specialist buys and sells to maintain a market for a particular security. -
ANSWER I, III and IV only
,Since 1900, the average return on stocks has exceeded the average return on
savings accounts by more than 6 percentage points. - ANSWER True
Exchange traded funds are - ANSWER baskets of securities that trade like a
single stock.
Liquidity is the ability to convert an investment into cash quickly with little or
no loss of value. - ANSWER True
Margin trading will magnify losses on a percentage basis. - ANSWER True
Earning a high rate of return with little or no risk is a realistic investment goal. -
ANSWER False
On a net basis, funds in the financial markets are generally supplied by -
ANSWER Individuals
IPOs are relatively safe investments. - ANSWER False
Historically, what is the correct ranking of the following securities from lowest
rate of return to the
highest? - ANSWER Short−term government bills, long−term government
bonds, stocks.
The present value of $1,000 discounted at the rate of 5% per year, to be
received at the end of 3 years is equal to - ANSWER $1,000/(1.05)^3
If the present value of an investment's benefits equals the present value of the
investment's costs, then the investor would earn a - ANSWER return equal to
the discount rate.
Which one following will lower required rates of return? - ANSWER lower
rates of inflation
In some markets it may take many months to sell a residential property. This is
an example of - ANSWER liquidity risk.
Table 1
, AB
1 Year Cash Flow
2 1 $(5,000)
3 2 $4,000
4 3 $3,000
Given a spreadsheet similar to the one shown in Table 1, the command to
compute the internal rate of return would be
A) =RATE(3,B3,B4,B2).
B) =TVM(A2:B4).
C) =IRR(B3:B4)-B2.
D) =IRR(B2:B4). - ANSWER D) =IRR(B2:B4).
The efficient frontier - ANSWER represents the best attainable tradeoff
between risk and return.
Liquidity is best described as: - ANSWER converting an asset into cash
without much of a price concession.
Stocks A and B have standard deviations of
8%
and
15%
respectively. The correlation between the two stocks' returns has historically
been
0.35.
What is the standard deviation of a portfolio consisting of
60%
invested in Stock A and
40%
invested in Stock B? - ANSWER 8.90
Compound interest is interest paid not only on the initial investment but also on
any interest earned after the initial investment. - ANSWER True
Inflation tends to have a particularly negative impact on the price of -
ANSWER Bonds
