FIN 501 CHAPTER 4, 5, 6 EXAM
QUESTIONS AND ANSWERS 100% PASS
2026 EDITION
Capital loss is computed by
A) subtracting the original cost of an investment from the proceeds received from the sale of
that investment minus any income from the investment.
B) subtracting the original cost of an investment from the proceeds received from the sale of
that investment plus any income from the investment.
C) subtracting the proceeds received from the sale of an investment from the original cost of
the investment.
D) subtracting the original cost of an investment from the proceeds received from the sale of
that investment. - ANS D
Rational investor's are motivated to purchase an asset because of its
A) expected returns.
B) past returns.
C) emotional benefits.
D) all of the above. - ANS A
The most predictable component of stock returns is
A) capital gains.
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,B) capital losses.
C) inflation adjusted return.
D) dividend income. - ANS D
Kelly bought a stock at a price of $22.50. She received a $1.75 dividend and sold the stock for
$24.75. What is Kelly's capital gain on this investment?
A) $4.00
B) $3.75
C) $2.25
D) $1.75 - ANS C
Ashley purchased a stock at a price of $27 a share. She received quarterly dividends of $0.75 per
share. After one year, Ashley sold the stock at a price of $29.25 a share. What is her percentage
holding period return on this investment?
A) 10.3%
B) 11.1%
C) 17.9%
D) 19.4% - ANS D
Inflation tends to have a particularly negative impact on the price of
A) real estate.
B) bonds.
C) gold.
D) crude oil. - ANS B
Historically, what is the correct ranking of the following securities from lowest rate of return to
the
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,highest?
A) Short-term government bills, long-term government bonds, stocks.
B) Long-term government bonds, short-term government bills, stocks.
C) Stocks, short-term government bills, long-term government bonds.
D) Historical returns do not exhibit a consistent pattern. - ANS A
Which of the following internal characteristics should cause investors to expect the highest rate
of return?
A) a steady record of past dividends
B) interest and principal guaranteed by the U.S. government
C) a record of excellent management and consistent dividend payments
D) poor management and excessive use of debt financing - ANS D
Which of the following investments may be impacted by government actions?
A) stocks
B) corporate bonds
C) government bonds
D) all of the above - ANS D
Over the long term, which one of the following has historically had the lowest risk and lowest
average annual rate of return?
A) common stock
B) long-term government bonds
C) real-estate
D) corporate bonds - ANS B
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, The time value of money concept best supports the idea of
A) the sooner the better.
B) better late than never.
C) a bird in hand is worth two in the bush.
D) good things come to those who wait. - ANS A
The present value of $10,000 discounted at 5% per year and received at the end of 5 years is
A) $10,000/1.25.
B) $10,000(1.05)5.
C) $10,000/(1.05)5.
D) $10,000 (1.05)1/5. - ANS C
Bob's house has doubled in value since he bought it 30 years ago. The house's value has
increased by an annual rate of
A) 2.34%.
B) 3.33%.
C) 6.67%.
D) 100%. - ANS A
Which one of the following statements is correct concerning the time value of money?
A) The future value of $1 at the end of two years is equal to $1 plus the first year's interest
times 1 plus the annual interest rate.
B) As the interest rate increases for any given year, the future value interest factor will decrease.
C) The future value of $1 decreases with the passage of time.
D) The future value interest factor is equal to zero if the interest rate is zero. - ANS A
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QUESTIONS AND ANSWERS 100% PASS
2026 EDITION
Capital loss is computed by
A) subtracting the original cost of an investment from the proceeds received from the sale of
that investment minus any income from the investment.
B) subtracting the original cost of an investment from the proceeds received from the sale of
that investment plus any income from the investment.
C) subtracting the proceeds received from the sale of an investment from the original cost of
the investment.
D) subtracting the original cost of an investment from the proceeds received from the sale of
that investment. - ANS D
Rational investor's are motivated to purchase an asset because of its
A) expected returns.
B) past returns.
C) emotional benefits.
D) all of the above. - ANS A
The most predictable component of stock returns is
A) capital gains.
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,B) capital losses.
C) inflation adjusted return.
D) dividend income. - ANS D
Kelly bought a stock at a price of $22.50. She received a $1.75 dividend and sold the stock for
$24.75. What is Kelly's capital gain on this investment?
A) $4.00
B) $3.75
C) $2.25
D) $1.75 - ANS C
Ashley purchased a stock at a price of $27 a share. She received quarterly dividends of $0.75 per
share. After one year, Ashley sold the stock at a price of $29.25 a share. What is her percentage
holding period return on this investment?
A) 10.3%
B) 11.1%
C) 17.9%
D) 19.4% - ANS D
Inflation tends to have a particularly negative impact on the price of
A) real estate.
B) bonds.
C) gold.
D) crude oil. - ANS B
Historically, what is the correct ranking of the following securities from lowest rate of return to
the
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,highest?
A) Short-term government bills, long-term government bonds, stocks.
B) Long-term government bonds, short-term government bills, stocks.
C) Stocks, short-term government bills, long-term government bonds.
D) Historical returns do not exhibit a consistent pattern. - ANS A
Which of the following internal characteristics should cause investors to expect the highest rate
of return?
A) a steady record of past dividends
B) interest and principal guaranteed by the U.S. government
C) a record of excellent management and consistent dividend payments
D) poor management and excessive use of debt financing - ANS D
Which of the following investments may be impacted by government actions?
A) stocks
B) corporate bonds
C) government bonds
D) all of the above - ANS D
Over the long term, which one of the following has historically had the lowest risk and lowest
average annual rate of return?
A) common stock
B) long-term government bonds
C) real-estate
D) corporate bonds - ANS B
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, The time value of money concept best supports the idea of
A) the sooner the better.
B) better late than never.
C) a bird in hand is worth two in the bush.
D) good things come to those who wait. - ANS A
The present value of $10,000 discounted at 5% per year and received at the end of 5 years is
A) $10,000/1.25.
B) $10,000(1.05)5.
C) $10,000/(1.05)5.
D) $10,000 (1.05)1/5. - ANS C
Bob's house has doubled in value since he bought it 30 years ago. The house's value has
increased by an annual rate of
A) 2.34%.
B) 3.33%.
C) 6.67%.
D) 100%. - ANS A
Which one of the following statements is correct concerning the time value of money?
A) The future value of $1 at the end of two years is equal to $1 plus the first year's interest
times 1 plus the annual interest rate.
B) As the interest rate increases for any given year, the future value interest factor will decrease.
C) The future value of $1 decreases with the passage of time.
D) The future value interest factor is equal to zero if the interest rate is zero. - ANS A
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