BFIN 300 Finals- Questions with Correct
Verified Answers
An underlying assumption of the dividend growth model is that a stock is worth:
the present value of the future income which it generates
The value of common stock today depends on:
the expected future dividends, capital gains, and discount rate.
The constant dividend growth model is:
generally not used in practice because most stocks grow at a non-constant rate.
The slope of an asset's security market line is the:
beta coefficient.
Risk that affects a large number of assets, each to a greater or lesser degree, is called:
systematic risk
The standard deviation of a portfolio will tend to increase when:
the portfolio concentration on a single cyclical industry increases
A symmetric, bell-shaped frequency distribution that is completely defined by its mean and
standard deviation is the:
normal distribution
The excess return required from a risky asset over that required from a risk-free asset is
called the:
, risk premium
The risk premium is computed by:
subtracting the average return on the US treasury bill from the average return for the investment
The relationship between nominal rates, real rates, and inflation is known as the
Fisher effect
The percentage of a portfolio's total value invested in a particular asset is called the:
portfolio weight.
The stated interest payment in dollars made on a bond each period is called the bond's
coupon
All else constant, a bond will sell at ____ when the YTM is ___ the coupon rate.
a discount, higher than
Assume you are using the dividend growth model to value stocks. If you expect the market
rate of return to increase across the board on all equity securities, then you should also
expect the:
market values of all stocks to decrease, all else constant
The rate of return required by investors in the market for owning a bond is called the
yield to maturity
Tucci Designs stock has a beta of .89 and a risk free rate of 2.15%, and the expected return
on the market is 11%. The expected return for the stock is closest to...
Verified Answers
An underlying assumption of the dividend growth model is that a stock is worth:
the present value of the future income which it generates
The value of common stock today depends on:
the expected future dividends, capital gains, and discount rate.
The constant dividend growth model is:
generally not used in practice because most stocks grow at a non-constant rate.
The slope of an asset's security market line is the:
beta coefficient.
Risk that affects a large number of assets, each to a greater or lesser degree, is called:
systematic risk
The standard deviation of a portfolio will tend to increase when:
the portfolio concentration on a single cyclical industry increases
A symmetric, bell-shaped frequency distribution that is completely defined by its mean and
standard deviation is the:
normal distribution
The excess return required from a risky asset over that required from a risk-free asset is
called the:
, risk premium
The risk premium is computed by:
subtracting the average return on the US treasury bill from the average return for the investment
The relationship between nominal rates, real rates, and inflation is known as the
Fisher effect
The percentage of a portfolio's total value invested in a particular asset is called the:
portfolio weight.
The stated interest payment in dollars made on a bond each period is called the bond's
coupon
All else constant, a bond will sell at ____ when the YTM is ___ the coupon rate.
a discount, higher than
Assume you are using the dividend growth model to value stocks. If you expect the market
rate of return to increase across the board on all equity securities, then you should also
expect the:
market values of all stocks to decrease, all else constant
The rate of return required by investors in the market for owning a bond is called the
yield to maturity
Tucci Designs stock has a beta of .89 and a risk free rate of 2.15%, and the expected return
on the market is 11%. The expected return for the stock is closest to...
