1. With respect to whole life insurance, all of the following statements are true except:

The "cost of dying" decreases as the policy owner ages.

The premium is fixed.

The portion of the of the premium allocated to the cost of insurance portion of the policy increases over time.

The life insurance company selects the investments for the cash value portion of the policy

2. A younger firm, with more growth opportunities, is less likely to pay dividends than an older company.

True

False

3. Stocks that provide investors with periodic income in the form of large dividends are called

small-cap stocks

income stocks

growth stocks

value stocks

4. If you purchase 100 shares of Ajax Corporation for $15 a share and one year later sell it for $20 a share, what is your holding period return if the stock also paid $2 per share dividends? (Ignore commissions and trading fees. Round to the nearest whole percent.)

10%

33%

40%

47%

5. Given the risk-free rate of 3.5 percent, and a corporate bond that will pay 10 percent. What is the risk premium for this bond investment?

10%

6.5%

0% because corporate bond is risk-free

3.5%

6. (Review TVM) You have been very risky with your investments but, having just turned 50 years of age, your investment adviser suggests you reallocate to reduce your risk for retirement. He advises you that your returns will be lower but it would be a wise move. You have $236 000 saved and wish to retire with $300 000. When will you be able to achieve this if the return is now 5.5 percent compounded annually?

In 4.48 years

In 5.5 years

In 1.3 years

In 9.96 years

7. Which of the following is a good example of systematic risk ?

The recent chip shortage caused by the pandemic

Extreme cold winter in Alberta this year

the low interest rates in effect because the 2008-2009 credit crisis

Decline in BlackBerry stock price because of its product

.

8. A very risky investment will normally have

a low standard deviation

wider range of returns

beta much less than one

all of the above

9. You have $10 000 to invest now and can add $550 a month, have a moderate risk profile, and would like to set these funds aside for retirement in 20 years. Your most appropriate option would be to

Put money in a savings account

invest in a balanced growth mutual fund

Invest in a stock mutual fund of small-cap, start-up, high-tech companies in South America

buy one-year GICs.