HS 328 Investments Exam Questions
With Correct Answers
All of the following is (are) among the responsibilities of FINRA EXCEPT
| | | | | | | | | | |
A)
educating investors. |
B)
fostering market transparency.
| |
C)
writing and enforcing rules governing the activities of all registered
| | | | | | | | | |
broker-dealer firms and registered brokers in the U.S.
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D)
writing and enforcing rules governing the activities of all registered
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investment advisors. - CORRECT ANSWER✔✔-The correct answer is
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(D).The SEC and state securities regulators are responsible for regulation
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|of registered investment advisors.
| | |
All of the following are likely to be classified as investment advisers by
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the U.S. Securities and Exchange Commission (SEC) EXCEPT
| | | | | | |
A)
,a financial analyst who issues a new report on the performance of value
| | | | | | | | | | | | |
stocks directly to a client.
| | | |
B)
an analyst who recommends a triple-A-rated bond to a client.
| | | | | | | | |
C)
a money manager who makes asset allocation assignments for
| | | | | | | | |
institutional investors. |
D)
a financial firm that acts as a dealer in investment grade bonds. -
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CORRECT ANSWER✔✔-The correct answer is (D). Broker-dealers are
| | | | | | | |
explicitly excluded from being classified as advisers under the legal
| | | | | | | | | |
framework of the Investment Advisers Act. Individuals or firms that
| | | | | | | | | |
issue reports or offer investment advice, including asset-allocation
| | | | | | | |
decisions, are considered to fit the definition of an investment adviser.
| | | | | | | | | |
Which of the following can be greatly reduced by diversification?
| | | | | | | | |
A)
Systematic risk |
B)
Market risk |
C)
Unsystematic risk |
D)
,Systematic and unsystematic risk - CORRECT ANSWER✔✔-The correct
| | | | | | | |
answer is (C).Unsystematic risk is reduced by diversification.
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Sam's retirement fund is expected to earn a nominal rate of 7 percent,
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and the inflation rate is estimated at 3 percent. What is Sam's real rate
| | | | | | | | | | | | | |
of return?
|
A)
1.43%
B)
2.33%
C)
3.88%
D)
4.00% - CORRECT ANSWER✔✔-The correct answer is (C).Real return =
| | | | | | | | | |
(1.07 ÷ 1.03) − 1 = 3.8835%
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Security A has the following returns over 4 years: 4%, 7%, 0%, and -1%.
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What is the mean return and the standard deviation (sample) for
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Security A? |
A)
Mean of 2.5% and standard deviation of 3.2%
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B)
Mean of 2.5% and standard deviation of 3.7%
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, C)
Mean of 4% and standard deviation of 3.2%
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D)
Mean of 4% and standard deviation of 3.7% - CORRECT ANSWER✔✔-
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The correct answer is (B).The mean is 2.5 percent and the standard
| | | | | | | | | | | |
deviation is close to 3.7 percent. You can calculate these using the ∑+
| | | | | | | | | | | | |
key on a financial calculator.
| | | |
If an investor owns a single share of a stock with a beta of 0.75, what
| | | | | | | | | | | | | | | |
can you conclude about his investment risk relative to the market?
| | | | | | | | | |
A)
The investor's total risk is 3/4 of the risk of the market.
| | | | | | | | | | |
B)
The investor is taking 75 percent more total risk than the risk of the
| | | | | | | | | | | | | |
market.
C)
The investor's systematic risk is ³⁄₄ of the risk of the market.
| | | | | | | | | | |
D)
The investor's diversifiable risk is 75% more than the total risk of the
| | | | | | | | | | | | |
market. - CORRECT ANSWER✔✔-The correct answer is (C).Beta only
| | | | | | | | |
measures systematic risk relative to 1, the market's beta. Beta assumes
| | | | | | | | | | |
a stock is added to an already diversified portfolio. Because a single
| | | | | | | | | | | |
stock has both diversifiable as well as systematic risk, an investor who
| | | | | | | | | | | |
With Correct Answers
All of the following is (are) among the responsibilities of FINRA EXCEPT
| | | | | | | | | | |
A)
educating investors. |
B)
fostering market transparency.
| |
C)
writing and enforcing rules governing the activities of all registered
| | | | | | | | | |
broker-dealer firms and registered brokers in the U.S.
| | | | | | |
D)
writing and enforcing rules governing the activities of all registered
| | | | | | | | | |
investment advisors. - CORRECT ANSWER✔✔-The correct answer is
| | | | | | | |
(D).The SEC and state securities regulators are responsible for regulation
| | | | | | | | |
|of registered investment advisors.
| | |
All of the following are likely to be classified as investment advisers by
| | | | | | | | | | | | |
the U.S. Securities and Exchange Commission (SEC) EXCEPT
| | | | | | |
A)
,a financial analyst who issues a new report on the performance of value
| | | | | | | | | | | | |
stocks directly to a client.
| | | |
B)
an analyst who recommends a triple-A-rated bond to a client.
| | | | | | | | |
C)
a money manager who makes asset allocation assignments for
| | | | | | | | |
institutional investors. |
D)
a financial firm that acts as a dealer in investment grade bonds. -
| | | | | | | | | | | | |
CORRECT ANSWER✔✔-The correct answer is (D). Broker-dealers are
| | | | | | | |
explicitly excluded from being classified as advisers under the legal
| | | | | | | | | |
framework of the Investment Advisers Act. Individuals or firms that
| | | | | | | | | |
issue reports or offer investment advice, including asset-allocation
| | | | | | | |
decisions, are considered to fit the definition of an investment adviser.
| | | | | | | | | |
Which of the following can be greatly reduced by diversification?
| | | | | | | | |
A)
Systematic risk |
B)
Market risk |
C)
Unsystematic risk |
D)
,Systematic and unsystematic risk - CORRECT ANSWER✔✔-The correct
| | | | | | | |
answer is (C).Unsystematic risk is reduced by diversification.
| | | | | | |
Sam's retirement fund is expected to earn a nominal rate of 7 percent,
| | | | | | | | | | | | |
and the inflation rate is estimated at 3 percent. What is Sam's real rate
| | | | | | | | | | | | | |
of return?
|
A)
1.43%
B)
2.33%
C)
3.88%
D)
4.00% - CORRECT ANSWER✔✔-The correct answer is (C).Real return =
| | | | | | | | | |
(1.07 ÷ 1.03) − 1 = 3.8835%
| | | | | |
Security A has the following returns over 4 years: 4%, 7%, 0%, and -1%.
| | | | | | | | | | | | | |
What is the mean return and the standard deviation (sample) for
| | | | | | | | | | |
Security A? |
A)
Mean of 2.5% and standard deviation of 3.2%
| | | | | | |
B)
Mean of 2.5% and standard deviation of 3.7%
| | | | | | |
, C)
Mean of 4% and standard deviation of 3.2%
| | | | | | |
D)
Mean of 4% and standard deviation of 3.7% - CORRECT ANSWER✔✔-
| | | | | | | | | |
The correct answer is (B).The mean is 2.5 percent and the standard
| | | | | | | | | | | |
deviation is close to 3.7 percent. You can calculate these using the ∑+
| | | | | | | | | | | | |
key on a financial calculator.
| | | |
If an investor owns a single share of a stock with a beta of 0.75, what
| | | | | | | | | | | | | | | |
can you conclude about his investment risk relative to the market?
| | | | | | | | | |
A)
The investor's total risk is 3/4 of the risk of the market.
| | | | | | | | | | |
B)
The investor is taking 75 percent more total risk than the risk of the
| | | | | | | | | | | | | |
market.
C)
The investor's systematic risk is ³⁄₄ of the risk of the market.
| | | | | | | | | | |
D)
The investor's diversifiable risk is 75% more than the total risk of the
| | | | | | | | | | | | |
market. - CORRECT ANSWER✔✔-The correct answer is (C).Beta only
| | | | | | | | |
measures systematic risk relative to 1, the market's beta. Beta assumes
| | | | | | | | | | |
a stock is added to an already diversified portfolio. Because a single
| | | | | | | | | | | |
stock has both diversifiable as well as systematic risk, an investor who
| | | | | | | | | | | |
