Jones_Chapter 6 - Sudy Guide - Chapter 6 Multiple Choice...

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Chapter Six The Risks and Returns from Investing 70 Chapter 6 Multiple Choice Questions 1. Total return is equal to: a. capital gain + price change. b. yield + income. c. capital gain - loss. d. yield + price change. (d) 2. 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) 3. An impending recession is an example of: a. interest rate risk b. inflation risk c. market risk d. financial risk (c) 4. Financial risk is most associated with: a. the use of equity financing by corporations b. the use of debt financing by corporations c. equity investments held by corporations d. debt investments held by corporations (b) 5. Political stability is the major factor concerning: a. exchange risk b. systematic risk c. nonsystematic risk d. country risk (d, moderate
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The Risks and Returns from Investing 71 6. Which of the following is not related to overall market variability? a. Financial risk. b. Interest rate risk. c. Purchasing power risk. d. Market risk. (a) 7. If a U.S. investor buys foreign stock, his dollar-denominated return will increase if the dollar: a. appreciates in value. b. depreciates in value. c. remains unchanged. d. moves to a net gain position. (b) 8. Total return as defined in the text is: a. the difference between the sale price and the purchase price of an investment. b. measured by dividing the sum of all cash flows received by the amount invested. c. the reciprocal of a return relative. d. measured by dividing all cash flows received by its selling price. (b) 9. The return relative solves the problem of: a. inflation. b negative returns. c. interest rates. d. tax differences. (b) 10. If the Dow Jones Industrials had a price appreciation of 6 percent one year and yet total return for the year was 11 percent, the difference would be due to: a. the tax treatment of capital gains. b.
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This note was uploaded on 06/02/2011 for the course FINA 3331 taught by Professor Staff during the Spring '08 term at Texas A&M University, Corpus Christi.

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Jones_Chapter 6 - Sudy Guide - Chapter 6 Multiple Choice...

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