1.
A debt security pays
A. a fixed level of income for the life of the
owner.
B. a variable level of income for owners on a fixed
income.
C. a fixed or variable income stream at the option of the
owner.
D. a fixed stream of income or a stream of income that is determined according to a
specified formula for the life of the security.
2. The largest component of the bond market is _______ debt.
A. Treasur
y
B. asset-
backed
C. corporat
e
D. tax-exempt
3. Which of the following securities is a money market
instrument?
A. Treasury note
B. Treasury bond
C. Municipal bond
D. *Commercial paper
4. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of
9%. What is your approximate annual real rate of return if the rate of inflation was 4% over
the year?
A. 5
%
B. 10
%
C. 7
%
D. 3
%
5. You purchased a share of stock for $20. One year later you received $1 as a dividend and sold the
share for $29. What was your holding-period return?
A. 45% B. 50%
C. 5% D. 40%
6. You have been given this probability distribution for the holding-period return for KMP
stock:
What is the expected variance for KMP stock?
A. 66.04
%
B. 69.96
%
C. 77.04
%
D. 63.72
%
7. Over the past year you earned a nominal rate of interest of 8% on your money. The
inflation rate was 3.5% over the same period. The exact actual growth rate of your
purchasing power was
A. 15.55
%.
B. 4.35
%.
C. 5.02
%.
D. 4.81
%.
8. If a portfolio had a return of 8%, the risk-free asset return was 3%, and the standard
deviation of the portfolio's excess returns was 20%, the Sharpe measure would be
A. 0.0
8.
B. 0.0
3.
C. 0.2
0.
D. 0.1
1.
E. 0.2
5.
[Link] riskiness of individual assets
A. should be considered for the asset in
isolation.
B. should be considered in the context of the effect on overall portfolio
volatility.
C. should be combined with the riskiness of other individual assets in the proportions these
assets constitute the entire portfolio.
D. should be considered in the context of the effect on overall portfolio volatility and should
be combined with the riskiness of other individual assets in the proportions these assets
constitute the entire portfolio.
10. You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard
deviation of 0.15 and a T-bill with a rate of return of 0.05.
What percentages of your money must be invested in the risky asset and the risk-free asset,
respectively, to form a portfolio with an expected return of 0.09?
A. 85% and
15%
B. 75% and
25%
C. 67% and
33%
D. 57% and
43%