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ch06 - Chapter 6 THE RISKS AND RETURNS FROM INVESTING...

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Chapter 6 THE RISKS AND RETURNS FROM INVESTING Multiple Choice Questions Return 1. Total return is equal to: d. yield + price change. (d, easy) 2. The return component that gives periodic cash flows to the investor is known as the: a. capital gain b. interest rate c. yield d. unrealized gain (c, easy) Risk 3. Investors should be willing to invest in riskier investments only: a. if the term is short. b. if there are no safe alternatives except for holding cash. c. if the expected return is adequate for the risk level d. if they are true speculators. (c, easy) 4. If interest rates are expected to rise, you would expect: (a, moderate) 5. An impending recession is an example of: 6. Financial risk is most associated with: Chapter Six The Risks and Returns from Investing 70
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7. Political stability is the major factor concerning: a. exchange risk b. systematic risk c. nonsystematic risk d. country risk (d, moderate) 8. Liquidity risk: 9. Which of the following is not related to overall market variability? 10. If a U.S. investor buys foreign stock, his dollar-denominated return will increase if the dollar: 11. New financial disclosure regulations affecting the brokerage industry are a type of: a. market risk. b. financial risk. c. business risk. d. liquidity risk. (c, moderate) 12. If interest rates rose, you would expect ------------ to also rise. (d, moderate) Measuring Returns Chapter Six The Risks and Returns from Investing 71
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