ESSENTIALS OF INVESTMENTS CH. 1 –
5 QUESTIONS WITH CORRECT
ANSWERS 2025
Holding-period return - correct answer-rate of return over a given investment period
dollar weighted average return - correct answer-the internal rate of return on an investment
scenario analysis - correct answer-
process of devising a list of possible economic scenarios and specifying the likelihood of each one, as
well as the HPR that will be realized in each case.
probability distribution - correct answer-list of possible outcomes with associated probabilities
expected return - correct answer-the mean value of the distribution of HPR
variance - correct answer-the expected value of the squared deviation from the mean
value at risk (VaR) - correct answer-measure of downside risk.
kurtosis - correct answer-measure of the fatness of the tails of a probability distribution.
skew - correct answer-measure of the asymmetry of a probability distribution
risk-free-rate - correct answer-the rate of return that can be earned with certainty
risk premium - correct answer-an expected return in excess of that on risk-free securities
excess return - correct answer-rate of return in excess of the risk-free-rate
, risk aversion - correct answer-reluctance to accept risk
sharpe measure - correct answer-ratio of portfolio risk premium to standard deviation
mean-variance analysis - correct answer-ranking portfolios by their sharpe measures
inflation rate - correct answer-the rate at which prices are rising
nominal interest rate - correct answer-the interest rate in terms of nominal dollars
real interest rate - correct answer-the excess of the interest rate over the inflation rate.
complete portfolio - correct answer-the entire portfolio including risky and risk-free assets
Primary Market - correct answer-Market for new issues of securities.
Secondary Market - correct answer-Market for already-existing securities.
Initial Public Offering (IPO) - correct answer-First sale of stock by a formerly private company.
Underwriters - correct answer-
Underwriters purchase securities from the issuing company and resell them.
Prospectus - correct answer-A description of the firm and the security it is issuing.
Private Placement - correct answer-
Primary offerings in which shares are sold directly to a small group of institutional or wealthy investors
.
5 QUESTIONS WITH CORRECT
ANSWERS 2025
Holding-period return - correct answer-rate of return over a given investment period
dollar weighted average return - correct answer-the internal rate of return on an investment
scenario analysis - correct answer-
process of devising a list of possible economic scenarios and specifying the likelihood of each one, as
well as the HPR that will be realized in each case.
probability distribution - correct answer-list of possible outcomes with associated probabilities
expected return - correct answer-the mean value of the distribution of HPR
variance - correct answer-the expected value of the squared deviation from the mean
value at risk (VaR) - correct answer-measure of downside risk.
kurtosis - correct answer-measure of the fatness of the tails of a probability distribution.
skew - correct answer-measure of the asymmetry of a probability distribution
risk-free-rate - correct answer-the rate of return that can be earned with certainty
risk premium - correct answer-an expected return in excess of that on risk-free securities
excess return - correct answer-rate of return in excess of the risk-free-rate
, risk aversion - correct answer-reluctance to accept risk
sharpe measure - correct answer-ratio of portfolio risk premium to standard deviation
mean-variance analysis - correct answer-ranking portfolios by their sharpe measures
inflation rate - correct answer-the rate at which prices are rising
nominal interest rate - correct answer-the interest rate in terms of nominal dollars
real interest rate - correct answer-the excess of the interest rate over the inflation rate.
complete portfolio - correct answer-the entire portfolio including risky and risk-free assets
Primary Market - correct answer-Market for new issues of securities.
Secondary Market - correct answer-Market for already-existing securities.
Initial Public Offering (IPO) - correct answer-First sale of stock by a formerly private company.
Underwriters - correct answer-
Underwriters purchase securities from the issuing company and resell them.
Prospectus - correct answer-A description of the firm and the security it is issuing.
Private Placement - correct answer-
Primary offerings in which shares are sold directly to a small group of institutional or wealthy investors
.
