Chaminade Univ MBA 754 (Investment Mgmt) Week 4 – Ch. 04 Quiz (Graded)

Grading SummaryThese
are the automatically computed results of your exam. Grades for essay
questions, and comments from your instructor, are in the “Details”
section below. Date Taken: Time Spent: Points Received:
Question
Type: # Of Questions: Multiple Choice 22

Grade
Details – All QuestionsQuestion 1. Question : In response to the same external
force, the return on one investment may increase while the return on another
investment may decrease.
Student
Answer: True
False

Question
2. Question : The coefficient of variation is used to compare assets with
varying rates of return.
Student
Answer: True
False

Question
3. Question : Which one of the following statements is correct?
Student
Answer: A capital loss is computed as the reduction in the value of an
investment minus the income received from that investment. The total return
from an investment is equal to the capital gain minus the current income.
A
capital gain is equal to the amount paid for an investment minus the proceeds
received from the sale of that investment. Current income is cash or near-cash
that is periodically received as a result of owning an investment.

Question
4. Question : Risk is the possibility that the actual rate of return will vary
from the expected rate of return.
Student
Answer: True
False

Question
5. Question : To determine the compounded annual rate of return on investments
held for more than a year, investors typically use the present-value-based
measure known as yield or
Student
Answer: holding period return.
internal
rate of return.
inflation-adjusted
return.
simple
return.

Question
6. Question : The holding period return considers the time value of money.
Student
Answer: True
False

Question
7. Question : Most investors are risk-seeking.
Student
Answer: True
False

Question
8. Question : The internal rate of return is the discount rate that equates the
present value of benefits to the cost of the investment.
Student
Answer: True
False

Question
9. Question : Which one of the following is an internal characteristic that can
affect the value of an investment?
Student
Answer: Federal Reserve actions
inflation
war
use of
debt financing

Question
10. Question : The holding period return should NOT be used when analyzing
long-term investments.
Student
Answer: True
False

Question
11. Question : Over the long term, which one of the following has historically
had the highest average annual rate of return?
Student
Answer: small-company stocks
long-term
government bonds
large-company
stocks
long-term
corporate bonds

Question
12. Question : A holding period return is calculated by adding the current
income to the capital gains and dividing this sum by the
Student
Answer: average investment value.
beginning
investment value.
total
income received.
selling
price of the investment.

Question
13. Question : Liquidity risk is defined as the risk of
Student
Answer: having to trade a security in a broad market.
not
being able to sell an investment conveniently and at a reasonable price.
having
inflation erode the purchasing power of your investment.
having
declining price levels affect the reinvestment rate of your current income
stream.

Question
14. Question : Ignoring risk, a satisfactory investment is one for which the
present value of benefits is less than the present value of costs.
Student
Answer: True
False

Question
15. Question : The markets in general are paying a 2% real rate of return.
Inflation is expected to be 3%. ABC stock commands a 6% risk premium. What is
the risk-free rate of return?
Student
Answer: 2%
5%
8%
11%

Question
16. Question : An ordinary annuity is defined as an annuity for which the cash
flows occur at the beginning of each year or payment period.
Student
Answer: True
False

Question
17. Question : The amount an investor is willing to pay for an investment
should be determined by the past performance of the investment.
Student
Answer: True
False

Question
18. Question : In the short term, stock prices tend to decline as inflation
rises.
Student
Answer: True
False

Question
19. Question : An ordinary annuity has cash flows that occur at the ________ of
each time period and are ________ in amount.
Student
Answer: beginning; constant
beginning;
variable
end;
constant
end;
variable

Question
20. Question : The required return on an investment includes a real rate of
return, an inflation premium and an interest premium.
Student
Answer: True
False

Question
21. Question : Internal factors such as the quality of management and the level
of corporate debt affect the rate of return on an individual stock.
Student
Answer: True
False

Question
22. Question : When the cost of an investment exceeds the present value of its
benefits, the investor would be earning a rate of return
Student
Answer: greater than the discount rate.
equal
to the discount rate.
equal
to the compounded rate.
less
than the discount rate.