2
Fin 5320 Final Exam with accurate detailed
|| || || || || || ||
solutions
Higher current consumption can lead to - ✔✔lower future consumption if income doesn't increase
|| || || || || || || || || || || || ||
If one is going to use debt, which characteristic should one try to have for the payment plan? -
|| || || || || || || || || || || || || || || || || || ||
✔✔pay over the shortest time period possible to keep total interest paid low
|| || || || || || || || || || || ||
This type of portfolio management style looks at the macro economy and which industries should
|| || || || || || || || || || || || || || ||
do well in the stage of the business cycle and then chooses stocks from those industries. - ✔✔top-
|| || || || || || || || || || || || || || || || ||
down
If an average investor has a strong aversion to risk and wants steady income, which of the
|| || || || || || || || || || || || || || || || ||
following investments is the better choice? - ✔✔bonds || || || || || || ||
Which of the following is a good way to get started investing for the average American? -
|| || || || || || || || || || || || || || || || ||
✔✔make investing automatic so you don't miss the income || || || || || || || ||
As the time between investing and needing the money increases (you don't need the money for a
|| || || || || || || || || || || || || || || || ||
long time), the asset allocation becomes more ____ and the total risk of the portfolio ______. -
|| || || || || || || || || || || || || || || || ||
✔✔aggressive; increases ||
Choosing between Coke and Pepsi is called - ✔✔Diversification || || || || || || || ||
If you are 35 years old, what is the common and conservative rule of thumb about your asset
|| || || || || || || || || || || || || || || || || ||
allocation? - ✔✔35% in bonds and 65% in stock || || || || || || || ||
If you have 4 to 6 years before you need the funds, what is a recommended asset allocation? -
|| || || || || || || || || || || || || || || || || || ||
✔✔50% in stock, 40% in bonds, and 10% in cash || || || || || || || || ||
, 2
Risk in the market just increased. As a result, the required rate of return _____ and the current
|| || || || || || || || || || || || || || || || || ||
price of a security _____. - ✔✔increases; decreases
|| || || || || || ||
The problem of base - ✔✔causes returns to be higher for lower priced stocks
|| || || || || || || || || || || || ||
Referring to the Ibbotson rates of return, which of the following is TRUE? - ✔✔Stocks earn
|| || || || || || || || || || || || || || || ||
about 3%-4% more than T-bonds on average since 1960
|| || || || || || || ||
Which is the best measure of risk for a diversified portfolio? - ✔✔beta
|| || || || || || || || || || || ||
Which of the following is FALSE about a longer time period's effect on risk? - ✔✔A longer time
|| || || || || || || || || || || || || || || || || ||
horizon increases an investor's sensitivity to a loss
|| || || || || || ||
Inflation risk is more important for - ✔✔stocks || || || || || || ||
bonds
The yield curve graphically shows - ✔✔maturity risk
|| || || || || || ||
Pepsi increased its debt level from 35% to 45%. The economy is growing slower. The first
|| || || || || || || || || || || || || || || ||
condition is _____ risk while the second condition is _____ risk. - ✔✔negative financial risk;
|| || || || || || || || || || || || || || ||
negative business cycle risk || || ||
An investor requires 10% from a stock that he bought when he thought it will earn 12%. Which of
|| || || || || || || || || || || || || || || || || ||
the following is TRUE? - ✔✔for the investor to gain in wealth, his HPR must be higher than 10%
|| || || || || || || || || || || || || || || || || || ||
You invest $1000 in Ford and earn 10%. You invest $2000 in AT&T and earn 9%. You invest
|| || || || || || || || || || || || || || || || || ||
$2200 in Microsoft and earn 12%. What is your HPR? Assume one year. - ✔✔10.46%
|| || || || || || || || || || || || || ||
Fin 5320 Final Exam with accurate detailed
|| || || || || || ||
solutions
Higher current consumption can lead to - ✔✔lower future consumption if income doesn't increase
|| || || || || || || || || || || || ||
If one is going to use debt, which characteristic should one try to have for the payment plan? -
|| || || || || || || || || || || || || || || || || || ||
✔✔pay over the shortest time period possible to keep total interest paid low
|| || || || || || || || || || || ||
This type of portfolio management style looks at the macro economy and which industries should
|| || || || || || || || || || || || || || ||
do well in the stage of the business cycle and then chooses stocks from those industries. - ✔✔top-
|| || || || || || || || || || || || || || || || ||
down
If an average investor has a strong aversion to risk and wants steady income, which of the
|| || || || || || || || || || || || || || || || ||
following investments is the better choice? - ✔✔bonds || || || || || || ||
Which of the following is a good way to get started investing for the average American? -
|| || || || || || || || || || || || || || || || ||
✔✔make investing automatic so you don't miss the income || || || || || || || ||
As the time between investing and needing the money increases (you don't need the money for a
|| || || || || || || || || || || || || || || || ||
long time), the asset allocation becomes more ____ and the total risk of the portfolio ______. -
|| || || || || || || || || || || || || || || || ||
✔✔aggressive; increases ||
Choosing between Coke and Pepsi is called - ✔✔Diversification || || || || || || || ||
If you are 35 years old, what is the common and conservative rule of thumb about your asset
|| || || || || || || || || || || || || || || || || ||
allocation? - ✔✔35% in bonds and 65% in stock || || || || || || || ||
If you have 4 to 6 years before you need the funds, what is a recommended asset allocation? -
|| || || || || || || || || || || || || || || || || || ||
✔✔50% in stock, 40% in bonds, and 10% in cash || || || || || || || || ||
, 2
Risk in the market just increased. As a result, the required rate of return _____ and the current
|| || || || || || || || || || || || || || || || || ||
price of a security _____. - ✔✔increases; decreases
|| || || || || || ||
The problem of base - ✔✔causes returns to be higher for lower priced stocks
|| || || || || || || || || || || || ||
Referring to the Ibbotson rates of return, which of the following is TRUE? - ✔✔Stocks earn
|| || || || || || || || || || || || || || || ||
about 3%-4% more than T-bonds on average since 1960
|| || || || || || || ||
Which is the best measure of risk for a diversified portfolio? - ✔✔beta
|| || || || || || || || || || || ||
Which of the following is FALSE about a longer time period's effect on risk? - ✔✔A longer time
|| || || || || || || || || || || || || || || || || ||
horizon increases an investor's sensitivity to a loss
|| || || || || || ||
Inflation risk is more important for - ✔✔stocks || || || || || || ||
bonds
The yield curve graphically shows - ✔✔maturity risk
|| || || || || || ||
Pepsi increased its debt level from 35% to 45%. The economy is growing slower. The first
|| || || || || || || || || || || || || || || ||
condition is _____ risk while the second condition is _____ risk. - ✔✔negative financial risk;
|| || || || || || || || || || || || || || ||
negative business cycle risk || || ||
An investor requires 10% from a stock that he bought when he thought it will earn 12%. Which of
|| || || || || || || || || || || || || || || || || ||
the following is TRUE? - ✔✔for the investor to gain in wealth, his HPR must be higher than 10%
|| || || || || || || || || || || || || || || || || || ||
You invest $1000 in Ford and earn 10%. You invest $2000 in AT&T and earn 9%. You invest
|| || || || || || || || || || || || || || || || || ||
$2200 in Microsoft and earn 12%. What is your HPR? Assume one year. - ✔✔10.46%
|| || || || || || || || || || || || || ||
