Investments II Final Exam UPDATED
ACTUAL QUESTIONS AND CORRECT
ANSWERS
Holding Period Return - Correct answers✔✔(Sales price - purchase price + dividends) /
(purchase price)
Geometric Return - Correct answers✔✔A compounded rate of return
n= number of returns
rn=actual return for period n
Geometric mean formula calculates the average return over time assuming all earning remain
invested.
Systematic Risk - Correct answers✔✔Cannot be diversified away
Purchasing Power Risk: inflation
Reinvestment Rate: get a bond with bad rate, rate goes up and your stuck with your rate
Interest Rate: rates may fluctuate on a way that's adverse to your benefit
Market Risk: SnP 500 has baarish period (its down)
Exchange Rate
Reinvestment Rate Risk SR - Correct answers✔✔Get a bond with bad rate, rate goes up and
you're stuck with your rate
Interest Rate Risk SR - Correct answers✔✔Rates may fluctuate in a way that's adverse to your
benefit
, Market Risk SR - Correct answers✔✔S&P 500 has bearish periods (it's down)
Unsystematic Risk - Correct answers✔✔Can be diversified away by combining multiple asset
classes and industries in a portfolio
Business Risk: balance sheet, struggles they face
Country
Credit or Default
Financial: risk that balance sheet, income statement etc. are not strong enough to support
business
Government/Regulation
Business Risk UR - Correct answers✔✔Risk related to the balance sheet and struggles a
company faces
Risk Premium - Correct answers✔✔The investment return an asset is expected to yield in excess
of the risk-free rate of return
Treynor Ratio - Correct answers✔✔The return is adjusted for systematic risk (beta)
Sharpe's Ratio - Correct answers✔✔The return is adjusted for total risk (standard deviation)
Jensen Alpha - Correct answers✔✔Uses market data and adjusts for systematic risk
Weak Form Market Hypothesis - Correct answers✔✔Historical prices and volume data
Semi-Strong Form Market Hypothesis - Correct answers✔✔Publicly available information
ACTUAL QUESTIONS AND CORRECT
ANSWERS
Holding Period Return - Correct answers✔✔(Sales price - purchase price + dividends) /
(purchase price)
Geometric Return - Correct answers✔✔A compounded rate of return
n= number of returns
rn=actual return for period n
Geometric mean formula calculates the average return over time assuming all earning remain
invested.
Systematic Risk - Correct answers✔✔Cannot be diversified away
Purchasing Power Risk: inflation
Reinvestment Rate: get a bond with bad rate, rate goes up and your stuck with your rate
Interest Rate: rates may fluctuate on a way that's adverse to your benefit
Market Risk: SnP 500 has baarish period (its down)
Exchange Rate
Reinvestment Rate Risk SR - Correct answers✔✔Get a bond with bad rate, rate goes up and
you're stuck with your rate
Interest Rate Risk SR - Correct answers✔✔Rates may fluctuate in a way that's adverse to your
benefit
, Market Risk SR - Correct answers✔✔S&P 500 has bearish periods (it's down)
Unsystematic Risk - Correct answers✔✔Can be diversified away by combining multiple asset
classes and industries in a portfolio
Business Risk: balance sheet, struggles they face
Country
Credit or Default
Financial: risk that balance sheet, income statement etc. are not strong enough to support
business
Government/Regulation
Business Risk UR - Correct answers✔✔Risk related to the balance sheet and struggles a
company faces
Risk Premium - Correct answers✔✔The investment return an asset is expected to yield in excess
of the risk-free rate of return
Treynor Ratio - Correct answers✔✔The return is adjusted for systematic risk (beta)
Sharpe's Ratio - Correct answers✔✔The return is adjusted for total risk (standard deviation)
Jensen Alpha - Correct answers✔✔Uses market data and adjusts for systematic risk
Weak Form Market Hypothesis - Correct answers✔✔Historical prices and volume data
Semi-Strong Form Market Hypothesis - Correct answers✔✔Publicly available information
