Finance Ch. 9

1. This includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment. A. average returnB. dollar returnC. market returnD. portfolio B
2. This is the dollar return characterized as a percentage of money invested. A. average returnB. dollar returnC. market returnD. percentage return D
3. This is a measure summarizing the overall past performance of an investment. A. average returnB. dollar returnC. market returnD. percentage return A
4. Which of these statements is true? A. When people purchase a stock, they know exactly what their dollar and percent return are going to be.B. Many people purchase stocks as they find comfort in the certainty for this safe form of investing.C. When people purchase a stock, they know the short-term return, but not the long term return.D. When people purchase a stock, they do not know what their return is going to be – either short term or in the long run. D
5. This is defined as the volatility of an investment, which includes firm specific risk as well as market risk. A. diversifiable riskB. market riskC. standard deviationD. total risk D
6. This is a measure of risk to reward earned by an investment over a specific period of time. A. coefficient of variationB. market deviationC. standard deviationD. total variation A
7. This index tracks 500 companies which allows for a great deal of diversification. A. NasdaqB. Fortune 500C. S&P 500D. Wall Street Journal C
8. This is defined as a combination of investment assets held by an investor. A. bundleB. market basketC. portfolioD. All of these C
9. This is defined as the portion of total risk that is attributable to firm or industry factors and can be reduced through diversification. A. firm specific riskB. market riskC. modern portfolio riskD. total risk A
10. This is the portion of total risk that is attributable to overall economic factors. A. firm specific riskB. market riskC. modern portfolio riskD. total risk B
11. This is another term for market risk. A. firm specific riskB. modern portfolio riskC. nondiversifiable riskD. total risk C
12. This is the concept and procedure for combining securities into a portfolio to minimize risk. A. firm specific theoryB. modern portfolio theoryC. optimal portfolio theoryD. total portfolio theory B
13. This is the investor’s combination of securities that achieves the highest expected return for a given risk level. A. efficient portfolioB. modern portfolioC. optimal portfolioD. total portfolio C
14. This is the term for portfolios with the highest return possible for each risk level. A. efficient portfoliosB. modern portfoliosC. optimal portfoliosD. total portfolios A
15. Which of the following makes this a true statement: The shape of the efficient frontier implies that A. diminishing returns apply to risk-taking in the investment world.B. increasing returns apply to risk-taking in the investment world.C. returns are not impacted by risk-taking in the investment world.D. None of these complete the sentence to make it true. A
16. This is a measurement of the co-movement between two variables that ranges between -1 and +1. A. coefficient of variationB. correlationC. standard deviationD. total risk B
17. To find the percentage return of an investment, A. multiply the dollar return by the investment’s value at the beginning of the period.B. divide the dollar return by the investment’s value at the beginning of the period.C. multiply the dollar return by the investment’s value at the end of the period.D. divide the dollar return by the investment’s value at the end of the period. B
18. Which statement is true? A. The larger the standard deviation, the lower the total risk.B. The larger the standard deviation, the higher the total risk.C. The larger the standard deviation, the more portfolio risk.D. The standard deviation is not an indication of total risk. B
19. We commonly measure the risk-return relationship using which of the following? A. coefficient of variationB. correlation coefficientC. standard deviationD. expected returns A

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