FINA Final Exam Questions with Correct Answers Latest Update 2025/2026
Weighted average of possible returns - Answers Based on probabilities.
Coefficient of Variation (CV) - Answers Risk per unit of return; calculated as standard deviation
÷ expected return.
Diversification - Answers Reduction of unsystematic risk by holding multiple assets.
Correlation Coefficient - Answers Measure from -1 to +1 that shows how securities move
together.
Portfolio Beta - Answers Weighted average of individual asset betas.
Systematic Risk - Answers Market-wide risk that cannot be diversified away.
Unsystematic Risk - Answers Company-specific risk that can be diversified away.
Total Risk - Answers Sum of systematic and unsystematic risk.
Standard Deviation - Answers Measure of total risk or volatility of returns.
Beta - Answers Measure of systematic risk relative to the market.
CAPM (Capital Asset Pricing Model) - Answers Model that gives required return: R = Rf + β(Rm -
Rf).
Security Market Line (SML) - Answers Graph showing the relationship between beta and
required return.
Slope of the SML - Answers Market risk premium (Rm - Rf).
Market Risk Premium - Answers Return of market minus risk-free rate (Rm - Rf).
Dividend Yield - Answers Dividend ÷ Price of stock.
Periodic Rate - Answers APR divided by number of compounding periods.
Effective Annual Rate (EAR) - Answers (1 + APR/m)^m - 1.
Annual Percentage Rate (APR) - Answers Nominal yearly interest rate without compounding.
Perpetuity - Answers Infinite stream of equal payments; PV = PMT ÷ r.
Present Value (PV) - Answers Value today of future cash flows.
Future Value (FV) - Answers Value of a current amount in the future.
Ordinary Annuity - Answers Payments occur at the end of each period.
Weighted average of possible returns - Answers Based on probabilities.
Coefficient of Variation (CV) - Answers Risk per unit of return; calculated as standard deviation
÷ expected return.
Diversification - Answers Reduction of unsystematic risk by holding multiple assets.
Correlation Coefficient - Answers Measure from -1 to +1 that shows how securities move
together.
Portfolio Beta - Answers Weighted average of individual asset betas.
Systematic Risk - Answers Market-wide risk that cannot be diversified away.
Unsystematic Risk - Answers Company-specific risk that can be diversified away.
Total Risk - Answers Sum of systematic and unsystematic risk.
Standard Deviation - Answers Measure of total risk or volatility of returns.
Beta - Answers Measure of systematic risk relative to the market.
CAPM (Capital Asset Pricing Model) - Answers Model that gives required return: R = Rf + β(Rm -
Rf).
Security Market Line (SML) - Answers Graph showing the relationship between beta and
required return.
Slope of the SML - Answers Market risk premium (Rm - Rf).
Market Risk Premium - Answers Return of market minus risk-free rate (Rm - Rf).
Dividend Yield - Answers Dividend ÷ Price of stock.
Periodic Rate - Answers APR divided by number of compounding periods.
Effective Annual Rate (EAR) - Answers (1 + APR/m)^m - 1.
Annual Percentage Rate (APR) - Answers Nominal yearly interest rate without compounding.
Perpetuity - Answers Infinite stream of equal payments; PV = PMT ÷ r.
Present Value (PV) - Answers Value today of future cash flows.
Future Value (FV) - Answers Value of a current amount in the future.
Ordinary Annuity - Answers Payments occur at the end of each period.
