FIN 620

Question 1

1.      Your portfolio is comprised of 30% of stock X, 50% of stock Y, and 20% of stock Z. Stock X has a beta of .64, stock Y has a beta of 1.48, and stock Z has a beta of 1.04. What is the beta of your portfolio?

[removed] A. 1.01
[removed] B. 1.05
[removed] C. 1.09
[removed] D. 1.14
[removed] E. 1.18

2 points   

Question 2

1.      Which one of the following is an example of systematic risk?

[removed] A. the price of lumber declines sharply
[removed] B. airline pilots go on strike
[removed] C. the Federal Reserve increases interest rates
[removed] D. a hurricane hits a tourist destination
[removed] E. people become diet conscious and avoid fast food restaurants

2 points   

Question 3

1.      The dominant portfolio with the lowest possible risk is:

[removed] A. the efficient frontier.
[removed] B. the minimum variance portfolio.
[removed] C. the upper tail of the efficient set.
[removed] D. the tangency portfolio.
[removed] E. None of these.

2 points   

Question 4

1.      Beta measures:

[removed] A. the ability to diversify risk.
[removed] B. how an asset covaries with the market.
[removed] C. the actual return on an asset.
[removed] D. the standard deviation of the assets’ returns.
[removed] E. All of these.

2 points   

Question 5

1.      The measure of beta associates most closely with:

[removed] A. idiosyncratic risk.
[removed] B. risk-free return.
[removed] C. systematic risk.
[removed] D. unexpected risk.
[removed] E. unsystematic risk.

2 points   

Question 6

1.      The separation principle states that an investor will:

[removed] A. choose any efficient portfolio and invest some amount in the riskless asset to generate the expected return.
[removed] B. choose an efficient portfolio based on individual risk tolerance or utility.
[removed] C. never choose to invest in the riskless asset because the expected return on the riskless asset is lower over time.
[removed] D. invest only in the riskless asset and tangency portfolio choosing the weights based on individual risk tolerance.
[removed] E. All of these.

2 points   

Question 7

1.      The diversification effect of a portfolio of two stocks:

[removed] A. increases as the correlation between the stocks declines.
[removed] B. increases as the correlation between the stocks rises.
[removed] C. decreases as the correlation between the stocks rises.
[removed] D. Both increases as the correlation between the stocks declines; and decreases as the correlation between the stocks rises.
[removed] E. None of these.

2 points   

Question 8

1.      You purchased 300 shares of Deltona, Inc. stock for $44.90 a share. You have received a total of $630 in dividends and $14,040 in proceeds from selling the shares. What is your capital gains yield on this stock?

[removed] A. 4.06%
[removed] B. 4.23%
[removed] C. 4.68%
[removed] D. 8.55%
[removed] E. 8.91%

2 points   

Question 9

1.      You bought 100 shares of stock at $20 each. At the end of the year, you received a total of $400 in dividends, and your stock was worth $2,500 total. What was your total dollar capital gain and total dollar return?

[removed] A. $400; $500
[removed] B. $400; $900
[removed] C. $500; $900
[removed] D. $900; $2,500
[removed] E. None of these

2 points   

Question 10

1.      One year ago, you purchased a stock at a price of $32 a share. Today, you sold the stock and realized a total return of 25%. Your capital gain was $6 a share. What was your dividend yield on this stock?

[removed] A. 1.25%
[removed] B. 3.75%
[removed] C. 6.25%
[removed] D. 18.75%
[removed] E. 21.25%

2 points   

Question 11

1.      The market portfolio of common stocks earned 14.7% in one year. Treasury bills earned 5.7%. What was the real risk premium on equities?

[removed] A. 5.0%
[removed] B. 6.5%
[removed] C. 9.0%
[removed] D. 12.2%
[removed] E. 18.7%

2 points   

Question 12

1.      A stock has an expected rate of return of 8.3% and a standard deviation of 6.4%. Which one of the following best describes the probability that this stock will lose 11% or more in any one given year?

[removed] A. less than 0.5%
[removed] B. less than 1.0%
[removed] C. less than 1.5%
[removed] D. less than 2.5%
[removed] E. less than 5%

2 points   

Question 13

1.      You just sold 200 shares of Langley, Inc. stock at a price of $38.75 a share. Last year you paid $41.50 a share to buy this stock. Over the course of the year, you received dividends totaling $1.64 per share. What is your capital gain on this investment?

[removed] A. -$550
[removed] B. -$222
[removed] C. -$3
[removed] D. $550
[removed] E. $878

2 points   

Question 14

1.      Today, you sold 200 shares of SLG, Inc. stock. Your total return on these shares is 12.5%. You purchased the shares one year ago at a price of $28.50 a share. You have received a total of $280 in dividends over the course of the year. What is your capital gains yield on this investment?

[removed] A. 4.80%
[removed] B. 5.00%
[removed] C. 6.67%
[removed] D. 7.59%
[removed] E. 11.67%

2 points   

Question 15

1.      Winslow, Inc. stock is currently selling for $40 a share. The stock has a dividend yield of 3.8%. How much dividend income will you receive per year if you purchase 500 shares of this stock?

[removed] A. $152
[removed] B. $190
[removed] C. $329
[removed] D. $760
[removed] E. $1,053

 

 

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