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| 1 | |
Skewness is a measure of ____________. |
| | A) | how fat the tails of a distribution are |
| | B) | the downside risk of a distribution |
| | C) | the normality of a distribution |
| | D) | the dividend yield of the distribution |
| | E) | A and C |
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| 2 | |
When a distribution is positively skewed, ____________. |
| | A) | standard deviation overestimates risk |
| | B) | standard deviation correctly estimates risk |
| | C) | standard deviation underestimates risk |
| | D) | the tails are fatter than in a normal distribution |
| | E) | none of the above |
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| 3 | |
A year ago, you invested $2,000 in a savings account that pays an annual interest rate of 6%. What is your approximate annual real rate of return if the rate of inflation was 3% over the year? |
| | A) | 4% |
| | B) | 10% |
| | C) | 7% |
| | D) | 3% |
| | E) | none of the above |
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| 4 | |
You purchased a share of stock for $20. One year later you received $1 as dividend and sold the share for $29. What was your holding period return? |
| | A) | 45% |
| | B) | 5% |
| | C) | 50% |
| | D) | 40% |
| | E) | none of the above |
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| 5 | |
Other things equal, an increase in the government budget deficit |
| | A) | drives the interest rate down. |
| | B) | drives the interest rate up. |
| | C) | might not have any effect on interest rates. |
| | D) | increases business prospects. |
| | E) | none of the above |
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| 6 | |
In words, the real rate of interest is approximately equal to |
| | A) | the nominal rate times the inflation rate. |
| | B) | the inflation rate minus the nominal rate. |
| | C) | the nominal rate minus the inflation rate. |
| | D) | the inflation rate divided by the nominal rate. |
| | E) | the nominal rate plus the inflation rate. |
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| 7 | |
An investor purchased a bond 45 days ago for $895. He received $12 in interest and sold the bond for $893. What is the holding period return on his investment? |
| | A) | 1.52% |
| | B) | 0.50% |
| | C) | 1.12% |
| | D) | 0.08% |
| | E) | 0.01% |
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| 8 | |
DFI, Inc. has the following probability distribution of holding period returns on its stock. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0077861671/1018530/Ch5q8.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (23.0K)</a>]]>
The expected return on DFI's stock is |
| | A) | 15.7%. |
| | B) | 12.4%. |
| | C) | 16.5%. |
| | D) | 17.8%. |
| | E) | 11.6%. |
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| 9 | |
DFI, Inc. has the following probability distribution of holding period returns on its stock. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0077861671/1018530/Ch5q9.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (23.0K)</a>]]>
The expected variance of these returns is |
| | A) | 66.6 |
| | B) | 35.5 |
| | C) | 29.4 |
| | D) | 40.5 |
| | E) | none of the above |
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| 10 | |
An investment provides a 3% return semi-annually, its effective annual rate is |
| | A) | 3.00% |
| | B) | 5.91% |
| | C) | 6.06% |
| | D) | 6.09% |
| | E) | none of the above |
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