A major decision confronting a business firm when purchasing marketable securities involves a trade-off between the opportunity to earn a return on idle funds during the holding period and the brokerage costs associated with the purchase and sale of marketable securities. Indicate whether the statement is true or false ANSWER TRUE
To determine the risk premium associated with an asset’s expected return, two components of the return are usually cited, only the first, the covariance of the asset’s return with the market portfolio, is used, because ________. A) the risk associated with the asset depends on the market risk B) it is the only part of […]
Treasury notes generate lower returns than U.S. Treasury bills. Indicate whether the statement is true or false ANSWER FALSE
What is the main determinant of the volatility of forward market returns? What will be an ideal response? ANSWER Answer: The main and only determinant of the volatility of forward market returns is the variance of the future exchange rate.
Most federal agency issues have short maturities and offer slightly higher yields than U.S. Treasury issues having similar maturities. Indicate whether the statement is true or false ANSWER TRUE
Controlled disbursing involves the strategic use of mailing points and bank accounts to lengthen mail float and clearing float, respectively. Indicate whether the statement is true or false ANSWER TRUE
Controlled disbursing is a method of consciously anticipating the mail, processing, and clearing time involved with the payment process. Indicate whether the statement is true or false ANSWER FALSE
What is the name given to the risk associated with an asset’s return arising from the covariance of the return on a large, well-diversified portfolio? A) covariance B) systematic risk C) idiosyncratic risk D) risk premium ANSWER Answer: B
What concept states that there is no systematic difference between the forward rate and the expected future spot rate, and that the expected forward market return is zero? A) unbiased predictor B) unbiasedness hypothesis C) uncovered interest rate parity D) unsystematic risk ANSWER Answer: B
Playing the float involves the strategic use of mailing points and bank accounts to lengthen mail float and clearing float, respectively. Indicate whether the statement is true or false ANSWER FALSE
