Question 1
1. An investment paying 4% compounded quarterly will have a value at the end of one year equal to
an investment paying 16% compounded annually at the end of 1 year.
an investment paying 2% compounded semi-annually at the end of 1 year.
an investment paying 4% compounded annually at the end of 4 years.
an investment paying 1% compounded annually at the end of 4 years.
4.5 points
Question 2
1. The risk of a portfolio consisting of two uncorrelated assets will be
equal to zero.
greater than the risk of the least risky asset but less than the risk level of the more risky asset.
greater than zero but less than the risk of the more risky asset.
equal to the average of the risk level of the two assets.
4.5 points
Question 3
1. Marco owns the following portfolio of stocks. What is the expected return on his portfolio?
4.7%
6.6%
8.4%
8.7%
4.5 points
Question 4
1. The transaction costs of investing directly in foreign-currency-denominated assets can be reduced by purchasing American Depositary Shares (ADSs).
True
False
4.5 points
Question 5
1. If you invest $2,000 at the end of each year for five years and you earn 7% interest compounded annually, how much will you have accumulated at the end of the fifth year?
$10,700
$11,501
$12,307
$14,026
4.5 points
Question 6
1. Ashley purchased a stock at a price of $27 a share. She received quarterly dividends of $0.75 per share. After one year, Ashley sold the stock at a price of $29.25 a share. What is her percentage holding period return on this investment?
10.3%
11.1%
17.9%
19.4%
4.5 points
Question 7
1. Meaningful measures of an investment's return must consider both income and capital gains.
True
False
4.5 points
Question 8
1. Inflation tends to have a particularly negative impact on the price of
real estate.
bonds.
gold.
crude oil.
4.5 points
Question 9
1. The required rate of return on the Cosmos Corporation's common stock is 10%, the current real rate of return in the market is 1%, and the inflation rate is 3%. In this case, the risk premium associated with Cosmos stock is
5%.
6%.
7%.
8%.
4.5 points
Question 10
1. The most predictable component of stock returns is
capital gains.
capital losses.
inflation adjusted return.
dividend income.
