1390 - Review for Exam 3 Instructions: Please read...

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Review for Exam 3 Instructions: Please read carefully The exam will have 20 multiple choice questions and 4 work problems. Questions in the multiple choice section will be either concept or calculation questions. The calculation questions will be similar to those in the quizzes, assignment, and review. However, the concept questions will be related to any topic we have covered in the class. The concept questions in the review are only some sample questions. You should NOT study only topics in the review. For the work problems, you need to solve the problems without knowing the possible answers. The questions will be similar to those in the quizzes, assignment, and review except that the possible solutions are not given. You can bring a formula sheet to the exam. The final exam schedules are as follows: o Final Exams for Classes Meeting Tu-Th at 9:30am Thursday, May 15 8:00 AM - 11:00 AM o Final Exams for Classes Meeting Tu-Th at 11am Monday, May 19 11:30 AM - 2:30 PM
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Chapter 12 RISK PREMIUM 1. The excess return required from a risky asset over that required from a risk-free asset is called the: a. risk premium. b. geometric premium. c. excess return. d. average return. e. variance. STRONG FORM EFFICIENCY 2. The hypothesis that market prices reflect all available information of every kind is called _____ form efficiency. a. open b. strong c. semi-strong d. weak e. stable DIVIDEND YIELD 3. The dividend yield is equal to _____, where P 1 is the purchase cost, P 2 represents the sale proceeds, and d is the dividend income. a. d ÷ P 1 b. d × P 1 c. d ÷ P 2 d. d × P 2 e. d ÷ (P 1 + P 2 ) HISTORICAL RECORD 4. Based on the period of 1926 through 2003, _____ have tended to outperform other securities over the long-term. a. U.S. Treasury bills b. large company stocks c. long-term corporate bonds d. small company stocks e. long-term government bonds RISK PREMIUM 5. Which one of the following is a correct statement concerning risk premium? a. The greater the volatility of returns, the greater the risk premium. b. The lower the volatility of returns, the greater the risk premium. c. The lower the average rate of return, the greater the risk premium. d. The risk premium is not correlated to the average rate of return. e. The risk premium is not affected by the volatility of returns. MARKET EFFICIENCY 6. In an efficient market, the price of a security will: a. always rise immediately upon the release of new information with no further price adjustments related to that information. b. react to new information over a two-day period after which time no further price adjustments related to that information will occur. c. rise sharply when new information is first released and then decline to a new stable level by the following day.
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d. react immediately to new information with no further price adjustments related to that information. e.
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1390 - Review for Exam 3 Instructions: Please read...

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