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Question
Security A has a higher standard deviation of returns than security B. We would expect that:
I. Security A would have a risk premium equal to security B.
II. The likely range of returns for security A in any given year would be higher than the likely range of returns for security B.
III. The Sharpe ratio of A will be higher than the Sharpe ratio of B.
A) I only
B) II only
C) II and III only
D) I, II, and III
Answer
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Related questions
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Suppose that in 2018 the expected dividends of the stocks in a broad market index equaled $240 million when the discount rate was 8% and the expected growth rate of the dividends equaled 6%. Using the constant-growth formula for valuation, if interest rates increase to 9%, the value of the market will change by ________.
A) -10%
B) -20%
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Q:
You buy a 10-year $1,000 par value 4% annual-payment coupon bond priced to yield 6%. You do not sell the bond at year-end. If you are in a 15% tax bracket, at year-end you will owe taxes on this investment equal to ________.
A) $9.10
B) $4.25
C) $7.68
D) $5.20
Q:
Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at ________.
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Q:
A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 12%. If the coupon rate is 9%, the intrinsic value of the bond today will be ________.
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Q:
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Q:
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Q:
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Q:
Day
1 2 3 4 Advances
870 760 960 840 Declines
880 990 790 910 Volume advancing(m)
580 620 480 510 Volume declining(m)
670 580 720 520 Yield on top-rated corporate bonds
6.8
%
6.7
%
6.7
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Q:
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A) $2.50
B) $2.65
C) $2.89
D) $3.12
Q:
On Monday morning you sell one June T-bond futures contract at $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700, and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer the following questions. Day Settle Monday
$
97,406.25 Tuesday
$
98,000.00 Wednesday
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Q:
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Q:
Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at ________.
A) $97.22
B) $104.49
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Q:
A coupon bond that pays interest semiannually has a par value of $1,000, matures in 8 years, and has a yield to maturity of 6%. If the coupon rate is 7%, the intrinsic value of the bond today will be ________.
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Q:
If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%.
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1.0 B) Portfolio
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20 C) Portfolio
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Q:
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Q:
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 21% and a standard deviation of return of 39%. Stock B has an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. The standard deviation of returns on the optimal risky portfolio is ________.
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Q:
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Q:
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Q:
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Q:
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C) 8.12%
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Q:
You buy a 10-year $1,000 par value zero-coupon bond priced to yield 6%. You do not sell the bond. If you are in a 28% tax bracket, you will owe taxes on this investment after the first year equal to ________.
A) $0
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Q:
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A) 7.24%
B) 8.82%
C) 9.12%
D) 9.62%
Q:
Which of the following is not one of the main areas covered in the examinations that must be taken in order to achieve the designation of Chartered Financial Analyst?
A) investment management ethics
B) securities analysis
C) securities marketing techniques
D) portfolio management
Q:
To become a CFA, you must do all of the following except which one?
A) Pass three exams designed to ensure that you have sufficient knowledge of investments.
B) Obtain 3 years of work experience in money management.
C) Become a member of a local Society of the Financial Analysts Federation.
D) Divest all your own stock holdings to eliminate any potential conflicts of interest with client recommendations.
Q:
A ________ insurance policy provides death benefits, with no buildup of cash value.
A) whole-life
B) universal life
C) variable life
D) term life
Q:
In a defined contribution pension plan, the ________ bears all of the fund's investment performance risk.
A) employer
B) employee
C) fund manager
D) government
Q:
When life insurance companies seek long term investments, they are focusing on________.
A) maximizing returns
B) smoothing out long-term returns
C) tax considerations
D) the investment horizon
Q:
One of the major functions of the investment committee is to ________.
A) determine security selection of each portfolio operated by the investment company
B) translate the objectives and constraints of the investment company into an asset universe
C) determine the percentages of each security in the total investment company portfolio
D) calculate and report the overall rate of return to investment company constituents