Question
1) A risk averse investor is Which of the following statements is true? a)minimize risk b)requires a risk premium c)minimizes return at given risk d)none
1) A risk averse investor is
Which of the following statements is true?
a)minimize risk
b)requires a risk premium
c)minimizes return at given risk
d)none
For questions 9 and 10 : Suppose you deposited $ 5,000 into a savings account today . The account pays a nominal annual interest rate of 6 % . One year from today , you withdraw $ 3,500 from the account . Assume that you make no additional deposits into or withdrawals from the account until the end of year 8 .
9 ) What is the balance on your account at the end of year 1? a) $ 1,500 b ) $ 1,800 ) 5,160 ) 5,300
10 ) What will your ending balance be 8 years from today? a) $ 2218 b ) $ 2391 ) $ 2707 ) $ 2869
11)You want to buy a home theater system for your new apartment and youdecided to get consumer credit to finance this purchase . Garanti Bank's quote for 2 year consumer credit is 1.2 % monthly . You wish to calculate the annual cost of this loan to you . Which of the following is correct ?
a ) EAR = ( 1+ 0,12 / 12 ) ^ 12 - 1
b ) EAR = ( 1 + 0,012 ) ^ 12 - 1
c ) EAR = ( 1 + 0,012 ) ^ 24 - 1
d ) EAR = ( 1 + 0,012 / 12 ) ^ 12 - 1
21)Which one is an alternative term for nonsystematic risk?
a) Firm- specific risk
b)Market risk
c)Risk premium
d)Nondiversifiable risk
25 ) Which of the following is NOT true for diversification in financial markets ?
a ) It is the concept of spreading your money among a number of different investments in order to reduce risk .
b ) Diversification - can increase the expected return of your portfolio .
c ) It's the idea that you shouldn't put all your eggs in one basket .
d ) It reduces nonsystematic risk of your portfolio .
26 ) Beta of Stock X is 1,5 . Risk free rate of return.is currently 3 percent and the market risk premium is estimated to be 6 percent . What is the expected return of Stock X according to Capital Asset Pricing Model ?
a ) 8 % b ) 12 % c ) 16 % d ) 20 %
For questions 27 and 28 : Consider two risky stocks . Stock A has an expected return of 10 % and a standard deviation of 25 % . Stock B has an expected return of 20 % and a standard deviation of 30 % . The correlation coefficient between the two stocks is 0,40 .
27 ) What is the standard deviation of a portfolio where 60 % of capital is invested in Stock A. and 40 % is invested in stock B ?
a ) 22,65 % b ) 25,32 % c ) 26,44 % d ) 27,36 %
28 ) What should be the weight of Stock B if you want to form a portfolio ( combining A and B ) with an expected return of 19 % ?
a ) 10 % b ) 30 % c ) 50 % d ) 70 %
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