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SDSU BA 323 FINANCE EXAM 2 NEWEST 2025
ACTUAL EXAM COMPLETE QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |ALREADED GRADED A+
A model based on the proposition that any stock's required
rate of return is equal to the risk-free rate of return plus a
risk premium that reflects only the risk remaining after
diversification
(beta) r(i) = r(rf) + (rm-rrf)b(i)
* (rm-rrf) is market risk premium - answer-capm (capital
asset pricing model)
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If beta = 1.0, the security is just as risky as the average
stock.
If beta > 1.0, the security is riskier than average.
If beta < 1.0, the security is less risky than average. Most
stocks have betas in the range of 0.5 to 1.5
A bond that sells below its par value; occurs whenever the
going rate of interest is above the coupon rate - answer-
discount bond
The rate of return earned on a bond when it is called
before its maturity date. • use the call price rather than the
maturity value - answer-yield to call
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The risk that a decline in interest rates will lead to a
decline in income from a bond portfolio.
( the concern that rates will fall, and future cfs will have to
be reinvested at lower rates, hence reducing income) -
answer-reinvestment risk
The concern that rising interest rates will cause the value
of a bond to fall. Long-term bonds have more! - answer-
price risk
Lt: small! Lock in those rates.
SDSU BA 323 FINANCE EXAM 2 NEWEST 2025
ACTUAL EXAM COMPLETE QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |ALREADED GRADED A+
A model based on the proposition that any stock's required
rate of return is equal to the risk-free rate of return plus a
risk premium that reflects only the risk remaining after
diversification
(beta) r(i) = r(rf) + (rm-rrf)b(i)
* (rm-rrf) is market risk premium - answer-capm (capital
asset pricing model)
,2|Page
If beta = 1.0, the security is just as risky as the average
stock.
If beta > 1.0, the security is riskier than average.
If beta < 1.0, the security is less risky than average. Most
stocks have betas in the range of 0.5 to 1.5
A bond that sells below its par value; occurs whenever the
going rate of interest is above the coupon rate - answer-
discount bond
The rate of return earned on a bond when it is called
before its maturity date. • use the call price rather than the
maturity value - answer-yield to call
, 3|Page
The risk that a decline in interest rates will lead to a
decline in income from a bond portfolio.
( the concern that rates will fall, and future cfs will have to
be reinvested at lower rates, hence reducing income) -
answer-reinvestment risk
The concern that rising interest rates will cause the value
of a bond to fall. Long-term bonds have more! - answer-
price risk
Lt: small! Lock in those rates.
