GEB 3006 Practice Quiz 6 Investments and
Retirement Planning Exam Q’s and A’s
The key to successful investing is asset class allocation, diversification, and appropriate use
of taxable, tax deferred and tax free accounts.
True or False - -True
-Assume a student has 4 individual stocks worth $2,500 each. In this case:
a) The student is well diversified.
b) The student should add 1 more stock to the portfolio to be well diversified.
c) The student is not adequately diversified. - -c) The student is not adequately diversified.
-Which type of investment provides an ownership in the company?
a) Fixed income investment.
b) Equity investment.
c) Leveraged lease.
d) Bridge financing. - -b) Equity investment.
-The total return on a stock is the total of the:
a) Dividend yield plus bond yield.
b) Dividend yield plus CAPM gain.
c) Dividend yield and capital gain yield.
d) None of the above. - -c) Dividend yield and capital gain yield.
-A stock pays a quarterly dividend of $1.00/share. The stock trades at $100 per share, and
has a book value of $50 per share.
What is the annual dividend yield?
a) 1%
b) 4%
c) 0.5%
d) 2% - -b) 4%
-What type of stock has greater risk and often does not pay dividends?
a) Large cap stocks.
b) Mid cap stocks.
c) Small cap stocks.
d) Large cap international stocks. - -c) Small cap stocks.
, -If a company's earnings do not vary much with the economy, it would be called a ____
stock.
a) Blue chip
b) Income
c) Cyclical
d) Defensive - -d) Defensive
-The risks of the overall market that can't be diversified by adding more stocks to a
portfolio is called _____ risk.
a) Non-systematic
b) Systemic
c) Systematic or market
d) Liquidity - -c) Systematic or market
-Average returns should always be used when evaluating stock performance since they are
more accurate than geometric returns.
True or False - -False
-Over the long term, which asset class provided the highest rate of return?
a) Money markets
b) Corporate bonds
c) Government bonds
d) Stocks - -d) Stocks
-The historical equity risk premium or excess market return for stocks over risk free
investments is _____.
a) 2% - 4%
b) 4% - 6%
c) 8% - 10%
d) A negative 3% - -b) 4% - 6%
-The returns on Real Estate Investment Trusts (REITs) is in the same range of returns as
______.
a) Money markets.
b) Corporate bonds.
c) Government bonds.
d) Stocks. - -d) Stocks
-The US stock market is essentially a ___________ market.
a) Large cap
Retirement Planning Exam Q’s and A’s
The key to successful investing is asset class allocation, diversification, and appropriate use
of taxable, tax deferred and tax free accounts.
True or False - -True
-Assume a student has 4 individual stocks worth $2,500 each. In this case:
a) The student is well diversified.
b) The student should add 1 more stock to the portfolio to be well diversified.
c) The student is not adequately diversified. - -c) The student is not adequately diversified.
-Which type of investment provides an ownership in the company?
a) Fixed income investment.
b) Equity investment.
c) Leveraged lease.
d) Bridge financing. - -b) Equity investment.
-The total return on a stock is the total of the:
a) Dividend yield plus bond yield.
b) Dividend yield plus CAPM gain.
c) Dividend yield and capital gain yield.
d) None of the above. - -c) Dividend yield and capital gain yield.
-A stock pays a quarterly dividend of $1.00/share. The stock trades at $100 per share, and
has a book value of $50 per share.
What is the annual dividend yield?
a) 1%
b) 4%
c) 0.5%
d) 2% - -b) 4%
-What type of stock has greater risk and often does not pay dividends?
a) Large cap stocks.
b) Mid cap stocks.
c) Small cap stocks.
d) Large cap international stocks. - -c) Small cap stocks.
, -If a company's earnings do not vary much with the economy, it would be called a ____
stock.
a) Blue chip
b) Income
c) Cyclical
d) Defensive - -d) Defensive
-The risks of the overall market that can't be diversified by adding more stocks to a
portfolio is called _____ risk.
a) Non-systematic
b) Systemic
c) Systematic or market
d) Liquidity - -c) Systematic or market
-Average returns should always be used when evaluating stock performance since they are
more accurate than geometric returns.
True or False - -False
-Over the long term, which asset class provided the highest rate of return?
a) Money markets
b) Corporate bonds
c) Government bonds
d) Stocks - -d) Stocks
-The historical equity risk premium or excess market return for stocks over risk free
investments is _____.
a) 2% - 4%
b) 4% - 6%
c) 8% - 10%
d) A negative 3% - -b) 4% - 6%
-The returns on Real Estate Investment Trusts (REITs) is in the same range of returns as
______.
a) Money markets.
b) Corporate bonds.
c) Government bonds.
d) Stocks. - -d) Stocks
-The US stock market is essentially a ___________ market.
a) Large cap
