Which of the following statements is true about variance? A) Variance describes how spread out a set of numbers or a value is around its mean or average. B) Variance is essentially the variability from the average. C) The larger the variance, the greater the dispersion. D) All of the above statements are true. […]
Date: September 19th, 2020
The textbook provides a history of returns from 1950 through 1999 for four classifications of securities in the United States. Rank the average standard deviation ( measure of risk) from the highest to lowest over this time period. A) Large-company stocks, small-company stocks, 3-month U.S. Treasury bills, long-term government bonds B) Long-term government bonds, 3-month […]
Date: September 19th, 2020
The chart below gives information for four classes of U.S. securities over the 50-year time period from 1950-1999. Order the securities from highest average annual return to lowest for this time period. Now rank the securities from highest to lowest based on risk. Is the information consistent with what financial theory tells us? Why or […]
Date: September 19th, 2020
Define risk. Give an example of a risk-free investment and explain why you claim it has no risk. Give an example of a risky investment and explain why you claim the investment to be risky. What will be an ideal response? ANSWER Answer: Risk is a measure of the uncertainty in a set […]
Date: September 19th, 2020
Assume that the financial markets are in equilibrium. Information on three particular stocks is provided in the table below. Find the risk free rate and the expected return on the market portfolio. Asset Expected Return Beta A 7.6% 0.2 B 12.4% 0.8 C 15.6% 1.2 A) 5%, 14% B) 5%, 18% C) 6%, 14% D) […]
Date: September 19th, 2020
In the EOQ model the optimal ordering quantity is the quantity for which the sum of the costs of ordering and carrying inventory is minimized. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following classifications of securities had NO negative one-year returns over the period 1950-1999? A) Long-term government bonds B) Large-company stocks C) 3-month U.S. Treasury bills D) Each of the classification of securities listed experienced at least one negative one-year return over the listed time period. ANSWER Answer: C
Date: September 19th, 2020
Which of the following classifications of securities had the smallest one-year return over the period 1950-1999? A) Long-term government bonds B) 3-month U.S. Treasury bills C) Small-company stocks D) Large-company stocks ANSWER Answer: C
Date: September 19th, 2020
Which of the following classifications of securities had the largest one-year return over the period 1950-1999? A) Small-company stocks B) Long-term government bonds C) 3-month U.S. Treasury bills D) Large-company stocks ANSWER Answer: A
Date: September 19th, 2020
Assume that the capital market is in equilibrium, the risk free rate is 2%, and the return on the market is 12%. You want to construct a portfolio on the SML with an expected return of 16%. What are the portfolio weights? A) -0.4, 1.4 B) -0.1, 1.1 C) 0.2, 0.8 D) 0.4, 0.6 E) […]
Date: September 19th, 2020
