FINA3313 Homework 3

FINA3313 Homework 3 - FINA3313-031 Business Finance...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
FINA3313-031 Business Finance Homework 3, Spring 2006 Due by May 5, 2006 Instructor: Bing Y. Du This homework only consists of multiple choice questions. Please mark your answers on the SCANTRON (form 882) correspondingly and only submit the scantron. Please write your name, last 4 digits of SSN, and “Homework3” on your scantorn. Late submission will not be accepted. There are total 59 questions which cover CH10-CH12. CH10 Introduction to risk and return (1-21) 1. A market index is used to measure performance of a broad-based portfolio of stocks. A True B False 2. Market risk can be eliminated in a stock portfolio through diversification. A True B False 3. Macro risks are faced by all common stock investors. A True B False 4. The risk that remains in a stock portfolio after efforts to diversify is known as unique risk. A True B False 5. If a stock is purchased for $25 per share and held one year, during which time a $1.75 dividend is paid and the price climbs to $26.75, the nominal rate of return is: A) 13.00% B) 14.00% C) 20.00% D) 27.00% 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6. An investor receives a 15% total return by purchasing a stock for $40 and selling it after one year with a 5% capital gain. How much was received in dividend income during the year? A) $2.00 B) $2.20 C) $4.00 D) $6.00 7. Real rates of return are typically less than nominal rates of return due to: A) inflation. B) capital gains. C) dividend payments. D) depreciation. 8. The Dow Jones Industrial Average is: A) the most representative of stock market indexes. B) an index of America's 500 major corporations. C) an index of 30 major industrial stocks. D) an equally weighted index of all stocks traded on the New York Stock Exchange. 9. In addition to the number of stocks represented, a difference between the S&P 500 and the Dow is that the S&P 500: A) dates back to the 19th century while the Dow is a recent innovation. B) is value-weighted while the Dow is an equally-weighted index. C) includes foreign stocks while the Dow is domestic. D) index includes dividends in its return while the Dow does not. 10. A maturity premium is offered on long-term Treasury bonds due to: A) the risk of changing interest rates. B) the risk of default. C) their unique risk. D) their systematic risk. 11. The risk premium that is offered on common stock is equal to the: A) expected return on the stock. B) real rate of return on the stock. C) excess of expected return over a risk-free return. D) expected return on the S&P 500 index. 2
Background image of page 2
12. The variance of an investment's returns is a measure of the: A) volatility of the rates of return. B) probability of a negative return. C) historic return over long periods. D) average value of the investment. 13. The appropriate opportunity cost of capital is the return that investors give up on
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 10

FINA3313 Homework 3 - FINA3313-031 Business Finance...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online