Question 11

(1 point)

The term inflation refers to

Question 11 options:

A)

an increase in nominal interest rates

B)

an increase in real interest rates

C)

an increase in general price levels

D)

an increase in gross domestic product

Question 12

(1 point)

The beta factor is an indicator of the degree to which the stock reacts to the changes in the returns of the market portfolio. True or false?

Question 12 options:

True

False

Question 13

(1 point)

The term structure of interest rates depicts the relationship between yield to maturity and

Question 13 options:

A)

coupon rates

B)

forward rates

C)

time to maturity

D)

default risk

Question 14

(1 point)

Probability distribution describes the expected rate of return and the variance or standard deviation associated with a single asset. True or false?

Question 14 options:

True

False

Question 15

(1 point)

A project will cost $1,000 initially, and is expected to return $500 in year 1, $400 in year 2, $300 in year 3, $100 in year 4, and nothing thereafter. What is the projects NPV if the appropriate cost of capital is 10%? Round your answer to the nearest dollar.

Question 15 options:

A)

+$79

B)

+$1,079

C)

+$182

D)

none of the above

Question 16

(1 point)

Your newborn daughter has received a total of $2,500 in cash from various friends and relatives. If you deposit this money for her in an investment that returns an average return of 12% a year, how much will she have accumulated on her 21st birthday, to the nearest dollar?

Question 16 options:

A)

$24,116

B)

$27,010

C)

$180,121

D)

$204,247

Question 17

(1 point)

If you make an investment that returns 10% the first year, 20% the second year, and 12% the third year, what is your total 3-year return? Round your answer to the nearest tenth of a percent.

Question 17 options:

A)

47.8%

B)

42.0%

C)

21.6%

D)

none of the above

Question 18

(1 point)

TIPS are

Question 18 options:

A)

bonds issued by the U.S. government with initial maturities of 12 months or less

B)

zero-coupon bonds that represent coupon or principal payments stripped from a level-coupon bond

C)

bonds issued by the U.S. government that are indexed to inflation

D)

bonds issued by the U.S. government that earn interest that is free from federal taxation

Question 19

(1 point)

The total risk of investments can be measured with such common absolute measures used in statistics as variance and standard deviation. True or false?

Question 19 options:

True

False

Question 20

(1 point)

Which of the following statements is true?

Question 20 options:

A)

It is always better to invest in a high-growth firm since it will offer a higher return on your investment dollars.

B)

Slower growing firms are the better choice for long-term investing since they are

slow but steady whereas the high-growth firms typically have only one or two good years after which they tend to earn less than the slower-growth firms.

C)

There is no necessary connection between a firm's growth rate and the rate of return you should expect to earn by investing in the firm.

D)

Given the same expected cash flows, a firm that has a lower cost of capital will sell for a lower price than a firm that has a higher cost of capital.