FINA 3315 UPDATED Exam Questions and
CORRECT Answers
The government is generally - CORRECT ANSWER - a demander of funds in the
financial market.
Which of the following are advantages of the buy and hold strategy?
I. rapid accumulation of wealth
II. low transaction costs
III. capital gains taxed at the long−term rate
IV. portfolio requires less time and energy to manage than for most other strategies - CORRECT
ANSWER - II, III and IV only
Commonly used multiples for determining a stock's value include
I. price to earnings.
II. price to sales.
III. price to cash flow.
IV. price to dividends. - CORRECT ANSWER - I, II and III only
The expected rate of return and standard deviations, respectively for four stocks are given below:
ABC 9%, 3%
CDE 11%, 9%
FGH 12%, 8%
IJK 14%, 10%
Which stock is clearly least desirable? - CORRECT ANSWER - CDE
American investors have several alternatives available to diversify their portfolios
internationally. In terms of transaction costs, which of the alternatives below is least attractive? -
CORRECT ANSWER - direct investment in foreign stocks
, Which of the following statements about short selling is (are) true?
I. Short selling requires an initial margin deposit.
II. Short sellers begin a transaction with a sale and end it with a purchase.
III. Short sellers profit when the stock prices rises.
IV. Short selling can be a risky strategy. - CORRECT ANSWER - I, II and IV only
From 1976 through 2014, the dividend yield on stocks has been ________ the coupon yield on
corporate bonds. - CORRECT ANSWER - consistently lower than
Traditional portfolio managers prefer wellminus−known companies because
I. stocks of wellminus−known firms tend to be less risky than stocks of lesserminus−known
firms.
II. individuals are more apt to purchase a mutual fund if it contains stocks of wellminus−known
firms.
III. window dressing encourages the purchase of wellminus−known stocks.
IV. institutional investors tend to exhibit "herdminus−like" behavior. - CORRECT
ANSWER - I, II , III and IV
The intrinsic value of a stock provides a purchase price for the stock - CORRECT
ANSWER - that is reasonable given the associated level of risk.
A holding period return is calculated by adding the current income to the capital gains and
dividing this sum by the - CORRECT ANSWER - beginning investment value.
Exchange traded funds are - CORRECT ANSWER - baskets of securities that trade like a
single stock.
Correlation is a measure of the relationship between two series of numbers. - CORRECT
ANSWER - true
CORRECT Answers
The government is generally - CORRECT ANSWER - a demander of funds in the
financial market.
Which of the following are advantages of the buy and hold strategy?
I. rapid accumulation of wealth
II. low transaction costs
III. capital gains taxed at the long−term rate
IV. portfolio requires less time and energy to manage than for most other strategies - CORRECT
ANSWER - II, III and IV only
Commonly used multiples for determining a stock's value include
I. price to earnings.
II. price to sales.
III. price to cash flow.
IV. price to dividends. - CORRECT ANSWER - I, II and III only
The expected rate of return and standard deviations, respectively for four stocks are given below:
ABC 9%, 3%
CDE 11%, 9%
FGH 12%, 8%
IJK 14%, 10%
Which stock is clearly least desirable? - CORRECT ANSWER - CDE
American investors have several alternatives available to diversify their portfolios
internationally. In terms of transaction costs, which of the alternatives below is least attractive? -
CORRECT ANSWER - direct investment in foreign stocks
, Which of the following statements about short selling is (are) true?
I. Short selling requires an initial margin deposit.
II. Short sellers begin a transaction with a sale and end it with a purchase.
III. Short sellers profit when the stock prices rises.
IV. Short selling can be a risky strategy. - CORRECT ANSWER - I, II and IV only
From 1976 through 2014, the dividend yield on stocks has been ________ the coupon yield on
corporate bonds. - CORRECT ANSWER - consistently lower than
Traditional portfolio managers prefer wellminus−known companies because
I. stocks of wellminus−known firms tend to be less risky than stocks of lesserminus−known
firms.
II. individuals are more apt to purchase a mutual fund if it contains stocks of wellminus−known
firms.
III. window dressing encourages the purchase of wellminus−known stocks.
IV. institutional investors tend to exhibit "herdminus−like" behavior. - CORRECT
ANSWER - I, II , III and IV
The intrinsic value of a stock provides a purchase price for the stock - CORRECT
ANSWER - that is reasonable given the associated level of risk.
A holding period return is calculated by adding the current income to the capital gains and
dividing this sum by the - CORRECT ANSWER - beginning investment value.
Exchange traded funds are - CORRECT ANSWER - baskets of securities that trade like a
single stock.
Correlation is a measure of the relationship between two series of numbers. - CORRECT
ANSWER - true
