Question
Compute the expected return of a portfolio given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 20.00%
Compute the expected return of a portfolio given these three economic states, their likelihoods, and the potential returns:
Economic State Probability Return
Fast Growth 20.00% 30.00%
Slow Growth 50.00% 6.00%
Recession 30.00% -2.00%
Answer
|
| 8.40% |
|
| 11.33% |
|
| 12.65% |
|
| 15.47% |
Compute the standard deviation of a portfolio given these three economic states, their likelihoods, and the potential returns:
Economic State Probability Return
Fast Growth 20.00% 30.00%
Slow Growth 50.00% 6.00%
Recession 30.00% -2.00%
Answer
|
| 1.28% |
|
| 4.36% |
|
| 7.82% |
|
| 11.34% |
Year-to-date, Company O had earned -2.10% return. During the same time period Company V earned 8.00% and Company M earned 6.25%. If you have a portfolio made up of 40.00% Company O, 30.00% Company V, and 30.00% Company M, what is the overall portfolio return?
Answer
|
| 5.778% |
|
| 4.270% |
|
| 6.871% |
|
| 3.435% |
Risk that CAN BE eliminated through proper diversification is called _____.
Answer
|
| market risk |
|
| firm-specific risk |
|
| systematic risk |
|
| non-diversifiable risk |
GIVEN: Spot Rate: 1 X = 1.02 Y 30 Day Forward Rate: 1 X = 1.15 Y Your currency is "X" and you will be paying 345Y. You would ____ because _____.
Answer
|
| pay now; of the irrelevance of payment time |
|
| pay now; it will take less "X" |
|
| pay in 30 days; it will take less "X" |
The amount of one currency needed to purchase one unit of another currency is the _____.
Answer
|
| derivative rate |
|
| exchange rate |
|
| backwardation rate |
|
| over-the-counter rate |
The price of an option is called a(n) _____.
Answer
|
| expiration cost |
|
| holding cost |
|
| premium |
|
| proceeds |
When a futures contract expires, the parties usually _____.
Answer
|
| have a party when losses are low |
|
| take delivery of the contract asset |
|
| do a cash settlement |
|
| swap off liabilities. |
When a forward contract expires, the parties will _____.
Answer
|
| have a party when losses are low |
|
| deliver the contract asset |
|
| do a cash settlement |
|
| swap off liabilities. |
Any asset whose value is derived from the value of some underlying asset is a(n) ____.
Answer
|
| derivative |
|
| primary capital |
|
| spot asset |
|
| intermediary asset |
Which of the following is not traded on an exchange?
Answer
|
| options |
|
| futures |
|
| forwards |
|
| they are all exchange-traded |
A system under which a country's exchange rates are tied to another currency by government policy is _____.
Answer
|
| floating exchange rates |
|
| pegged exchange rates |
|
| convertible exchange rates |
|
| forward rates |
One of the _______ for business with a floating exchange rate system is the _______ planning business activities in an international market.
Answer
|
| disadvantages; difficulty of |
|
| advantages; easiness of |
|
| irrelevant situations; normal |
|
| none of the above |
U.S. dollars deposited in foreign banks are called _____ and interest paid on these deposits is normally tied to _____.
Answer
|
| non-foreign deposits; FED funds rate |
|
| indirect dollars; Discount Funds Rate |
|
| Eurodollars; LIBOR |
|
| none of the above |
____ is a disadvantage of the gold standard.
Answer
|
| Excess currency slowing economic growth |
|
| Excess inflation |
|
| A non-variable beta |
|
| Lack of currency to promote continued economic expansion |
A monetary system in which paper money can be converted directly to gold is a(n) ___.
Answer
|
| dollar backed float |
|
| gold standard |
|
| currency float |
|
| Americanized gold standard |
|
| none of the above |
Reason(s) for the Great Depression following the Great War include:
Answer
|
| trade protectionism |
|
| isolationism |
|
| nationalism |
|
| all of the above |
|
| none of the above |
An agreement between the WW II allies in 1944 designed to prevent the problems leading to the Great Depression and WW II and to rebuild Asia and Europe was the _____.
Answer
|
| Armistice of 1945 |
|
| Bretton Woods Agreement |
|
| Lend Lease Act for Asia and Europe |
|
| none of the above |
A derivative is used to ____ thereby _____.
Answer
|
| float; gaining excess currency for expansion |
|
| peg currency; improving trade with a primary partner |
|
| hedge; reducing/eliminating risk |
|
| none of the above |
Easier business planning is an advantage of the ______ system.
Answer
|
| mixed exchange rate |
|
| floating exchange rate |
|
| derivative exchange rate |
|
| gold standard |
|
| none of the above |
____ is the chance that some unfavorable event will occur.
Answer
|
| Expected return |
|
| Risk |
|
| Coefficient of variation |
|
| Correlation |
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