FIN 4350 Quiz 2 QUESTION 1 The return of holding a stock over certain period can be expressed as __

FIN 4350 Quiz 2

QUESTION 1

The return of holding a stock over certain period can be expressed as __ .

    A.    
the capital gain yield plus the expected inflation rate

    B.    
the capital gain yield plus the dividend yield

    C.    
the capital gain yield minus the dividend yield

    D.    
the dividend yield plus the expected inflation rate

1 points   

QUESTION 2

Suppose an investor earned returns -11%, 15%, and 20% over the past three years, what is the arithmetic average of the performance?

    A.    
15.67%

    B.    
8%

    C.    
11.22%

    D.    
6.45%

1 points   

QUESTION 3

Suppose an investor earned returns -12%, 20%, and 25% over the past three years, what is the geometric average of the performance?

    A.    
8.42%

    B.    
11%

    C.    
9.7%

    D.    
18.88%

1 points   

QUESTION 4

According to the definition, the dollar-weighted return can be considered equivalent to

    A.    
difference between cash inflows and cash outflows

    B.    
arithmetic average return

    C.    
geometric average return

    D.    
internal rate of return

1 points   

QUESTION 5

Suppose you consider a financial instrument that offers a nominal annual return of 12%, and the expected inflation rate is reported as 3%, what real rate do you expect to earn?

    A.    
5.48%

    B.    
8.74%

    C.    
9%

    D.    
12%

1 points   

QUESTION 6

In the following statistical variables, which of them cannot be negative?

    A.    
covariance

    B.    
variance

    C.    
E(r), or expected returns

    D.    
correlation coefficient

1 points   

QUESTION 7

In what of the following situations, diversification will be least effective

    A.    
when security returns are all negative

    B.    
when security returns are negatively correlated

    C.    
when security returns are positively correlated

    D.    
when security returns are uncorrelated

1 points   

QUESTION 8

Suppose there is a positive correlation between portfolio A and portfolio B. What of the following descriptions is correct?

    A.    
the returns of A and B tend to move inversely

    B.    
the returns of A and B tend to vary independently of each other

    C.    
the returns of A and B tend to move together

    D.    
none of the above

1 points   

QUESTION 9

What type of risk that could be eliminated through portfolio diversification?

    A.    
beta

    B.    
firm-specific risk

    C.    
market risk

    D.    
systematic risk

1 points   

QUESTION 10

What of the following statement provides the correct way to find the optimal risky portfolio

    A.    
The minimum-variance point on the efficient frontier

    B.    
The maximum-return point on the efficient frontier

    C.    
The line with the steepest slope that connects the risk-free rate to the efficient frontier

    D.    
None of the above