Practice_FinalExam_Exam - HADM225Sp07Final1 KEY Created:...

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HADM225Sp07Final1 KEY Created: 12:55:52 PM EDT 1. One year ago, you purchased a stock at a price of $32 a share. Today, you sold the stock and realized a total return of 25 percent. Your capital gain was $6 a share. What was your dividend yield on this stock? a. 1.25 percent b. 3.75 percent C 6.25 percent d. 18.75 percent e. 21.25 percent 2. The U.S. Securities and Exchange Commission periodically charges individuals for insider trading and claims those individuals have made unfair profits. Based on this fact, you would tend to argue that the financial markets are at best _____ form efficient. a. weak b. semiweak C semistrong d. stron g e. perfect 3. If you excel in analyzing the future outlook of firms, you would prefer that the financial markets be ____ form efficient so that you can have an advantage in the marketplace. A weak b. semiweak c. semistrong d. stron g e. perfect 4. The linear relation between an asset's expected return and its beta coefficient is the: a. reward-to-risk ratio. b. portfolio weight. c. portfolio risk. D security market line. e. market risk premium. 5. Which of the following are examples of nondiversifiable risks? I. the inflation rate spikes nationwide II. an unexpected terrorist event occurs III. the price of lumber suddenly spikes IV. taxes are increased on hotels a. I and III only b. II and IV only C I and II only d. II and III only e. I, II, and IV only 6. The market has an expected rate of return of 9.8 percent. The long-term government bond is expected to yield 4.5 percent and the U.S. Treasury bill is expected to yield 3.4 percent. The inflation rate is 3.1 percent. What is the market risk premium? a. 2.2 percent b. 3.3 percent
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c. 5.3 percent D 6.4 percent e. 6.7 percent 7. Nuvo, Inc. stock has a beta of .86 and an expected return of 10.5 percent. The risk-free rate of return is 3.2 percent and the market rate of return is 11.2 percent. Which one of the following statements is true given this information? a. The return on Nuvo stock will graph below the Security Market Line. B Nuvo stock is underpriced. c. The expected return on Nuvo stock based on the Capital Asset Pricing Model is 9.88 percent. d. Nuvo stock has more systematic risk than the overall market. e.
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This test prep was uploaded on 02/20/2009 for the course H ADM 225 taught by Professor Jwellman during the Fall '07 term at Cornell University (Engineering School).

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Practice_FinalExam_Exam - HADM225Sp07Final1 KEY Created:...

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