APMA Module Questions and answers
rated A+ 2025/2026
Five years ago, ABC corporation floated a $100 million bond issue that would be used to finance
improvements at its main manufacturing and distribution center. However, orders for its products have
dropped dramatically due to much lower than anticipated demand. The company believes it may miss
paying the coupon payment on the bond issue in the upcoming fiscal year. The holders of the ABC
Corporation bonds are facing which of the following types of risk?
A) Reinvestment risk
B) Market risk
C) Default risk
D) Currency risk - correct answer ✔C) Default risk
Explanation:
Default risk is the risk that a business will be unable to service its debt obligations.
LO 1-1
Exchange rate risk refers to fluctuations in
A) the price of one currency relative to other currencies.
B) the value of an investor's portfolio.
C) the prices of stocks on the New York Stock Exchange.
D) the values of bonds and other debt instruments. - correct answer ✔A) the price of one currency
relative to other currencies.
Explanation:
,Relative currency prices, and changes to them, are the basis of exchange rate risk.
LO 1-1
Which of the following are sources of investment risk?
I. Endogenous events
II. A firm's financing decisions
III. Higher interest rates
IV. A loss of purchasing power
A) I, II, III, and IV
B) I II, and III
C) II, III, and IV
D) I, II, and IV - correct answer ✔A) I, II, III, and IV
Explanation:
All of these options are types of systematic or unsystematic risk.
LO 1-1
An investor who wants to bear the least amount of risk should acquire a stock with a beta coefficient of
A) 0.7.
B) 1.2.
C) 1.0.
D) 2.0. - correct answer ✔A) 0.7.
,Explanation:
When seeking an investment having the least amount of risk, the lowest beta should be selected.
LO 1-2
What is the weighted-average return for the following portfolio of securities?
Refer to figure 1
A) 14.67%
B) 14.88%
C) 15.36%
D) 7.44% - correct answer ✔B) 14.88%
Explanation:
The weighted-average return is calculated as follows:
20, Input
22,000 E3
8, Input
18,000, E3
16, Input
10,000, E3
DOWNSHIFT, 6
Refer to figure 2
, LO 1-2
Assuming a normal distribution, if a security has an average mean return of 14.2% and a standard
deviation of 8.4, then
A) the security's returns can be expected to be between 8.4% and 14.2% approximately 95% of the time.
B) the security's returns can be expected to never be negative.
C) the security's returns can be expected to be between 5.8% and 22.6% approximately 68% of the time.
D) the security's annual volatility can be expected to be within a range approximately 8.4% above and
8.4% below the current fair market value.C)
the security's returns can be expected to be between 5.8% and 22.6% approximately 68% of the time. -
correct answer ✔C) the security's returns can be expected to be between 5.8% and 22.6%
approximately 68% of the time.
Explanation:
This security can be expected to have a return that does not range beyond one standard deviation on
either side of its average return approximately 68% of the time.
LO 1-2
Which of the following statements regarding covariance is correct?
A) It is used in the formula to compute beta.
B) It has boundaries of -1.0 and +1.0.
C) It is a measure of the strength of the relationship between two securities' price movements.
D) It is multiplied by the standard deviation of each asset to obtain correlation coefficient. - correct
answer ✔C) It is a measure of the strength of the relationship between two securities' price
movements.
rated A+ 2025/2026
Five years ago, ABC corporation floated a $100 million bond issue that would be used to finance
improvements at its main manufacturing and distribution center. However, orders for its products have
dropped dramatically due to much lower than anticipated demand. The company believes it may miss
paying the coupon payment on the bond issue in the upcoming fiscal year. The holders of the ABC
Corporation bonds are facing which of the following types of risk?
A) Reinvestment risk
B) Market risk
C) Default risk
D) Currency risk - correct answer ✔C) Default risk
Explanation:
Default risk is the risk that a business will be unable to service its debt obligations.
LO 1-1
Exchange rate risk refers to fluctuations in
A) the price of one currency relative to other currencies.
B) the value of an investor's portfolio.
C) the prices of stocks on the New York Stock Exchange.
D) the values of bonds and other debt instruments. - correct answer ✔A) the price of one currency
relative to other currencies.
Explanation:
,Relative currency prices, and changes to them, are the basis of exchange rate risk.
LO 1-1
Which of the following are sources of investment risk?
I. Endogenous events
II. A firm's financing decisions
III. Higher interest rates
IV. A loss of purchasing power
A) I, II, III, and IV
B) I II, and III
C) II, III, and IV
D) I, II, and IV - correct answer ✔A) I, II, III, and IV
Explanation:
All of these options are types of systematic or unsystematic risk.
LO 1-1
An investor who wants to bear the least amount of risk should acquire a stock with a beta coefficient of
A) 0.7.
B) 1.2.
C) 1.0.
D) 2.0. - correct answer ✔A) 0.7.
,Explanation:
When seeking an investment having the least amount of risk, the lowest beta should be selected.
LO 1-2
What is the weighted-average return for the following portfolio of securities?
Refer to figure 1
A) 14.67%
B) 14.88%
C) 15.36%
D) 7.44% - correct answer ✔B) 14.88%
Explanation:
The weighted-average return is calculated as follows:
20, Input
22,000 E3
8, Input
18,000, E3
16, Input
10,000, E3
DOWNSHIFT, 6
Refer to figure 2
, LO 1-2
Assuming a normal distribution, if a security has an average mean return of 14.2% and a standard
deviation of 8.4, then
A) the security's returns can be expected to be between 8.4% and 14.2% approximately 95% of the time.
B) the security's returns can be expected to never be negative.
C) the security's returns can be expected to be between 5.8% and 22.6% approximately 68% of the time.
D) the security's annual volatility can be expected to be within a range approximately 8.4% above and
8.4% below the current fair market value.C)
the security's returns can be expected to be between 5.8% and 22.6% approximately 68% of the time. -
correct answer ✔C) the security's returns can be expected to be between 5.8% and 22.6%
approximately 68% of the time.
Explanation:
This security can be expected to have a return that does not range beyond one standard deviation on
either side of its average return approximately 68% of the time.
LO 1-2
Which of the following statements regarding covariance is correct?
A) It is used in the formula to compute beta.
B) It has boundaries of -1.0 and +1.0.
C) It is a measure of the strength of the relationship between two securities' price movements.
D) It is multiplied by the standard deviation of each asset to obtain correlation coefficient. - correct
answer ✔C) It is a measure of the strength of the relationship between two securities' price
movements.
