practice problems for exam_4_5_6_7_8 (1)

practice problems for exam_4_5_6_7_8 (1) - EXAM 2 Practice...

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EXAM 2 Practice Questions for Chapter 4, 5, 6, 7, and 8 1 . These feature debt securities or instruments with maturities of one year or less. a. money markets b. primary markets c. secondary markets d. over-the-counter stocks 2. When you buy a share from IPO, it is a primary market transaction. a. True b. False 3. According to ----------- insiders cannot make abnormal return. a. Semi-strong form of efficiency b. Strong form of efficiency c. Weak form of efficiency. 4. If a market is semi-strong form efficient, it is also weak form efficient. a. True b. False 5. ------------- is the best measure of risk in a portfolio context. a. Standard Deviation b. Coefficient of Variation c. Market risk 6. Which of the following measures market risk? a. Beta b. Coefficient of Variation c. Standard Deviation 7. Which of the following measures risk per unit of return? a. Standard Deviation b. Correlation Coefficient c. Covariance d. Coefficient of Variation 8. In general investors are risk averse. a. True b. False 9. If two stocks are perfectly correlated, a portfolio of those two stocks can eliminate risk significantly. a. True b. False 10. Investors can eliminate market risk by making portfolios. a. True b. False 11. Beta measures diversifiable risk. a. True b. False 12. If a stock has a beta of 1.5, it is more volatile than the market. a. True b. False 13. According to CAPM, investors are rewarded for taking diversifiable risk. a. True b. False c. Sometimes 14. A portfolio consisting of all the stocks in the market is called a. Market Portfolio b. Big Portfolio c. Simple Portfolio 1
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15. Low correlation between stocks is the reason for diversification benefits. a. True b. False 16. The asset pricing theory based on a beta, a measure of market risk is known as a. Behavioral Asset Pricing Model b. Capital Asset Pricing Model c. Efficient Markets Asset Pricing Model d. Efficient Market Hypothesis 17. The New York Stock Exchange is primarily a. A secondary market. b. A physical location auction market. c. An over-the-counter market. d. Statements a and b are correct. e. Statements b and c are correct. 18. Which of the following is an example of a capital market instrument? a. Commercial paper. b. Preferred stock. c. U.S. Treasury bills. d. Banker’s acceptances. 19. Your uncle would like to limit his interest rate risk and his default risk, but he would still like to invest in corporate bonds. Which of the possible bonds listed below best satisfies your uncle’s criteria? a. AAA bond with 10 years to maturity. b. BBB perpetual bond. c. BBB bond with 10 years to maturity. d. AAA bond with 5 years to maturity. e. BBB bond with 5 years to maturity. 20. Which of the following is likely to increase the level of interest rates in the economy? a. Households start saving a larger percentage of their income.
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This note was uploaded on 01/25/2012 for the course ACC 101\ taught by Professor Sirbondoc during the Spring '11 term at Ateneo de Manila University.

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practice problems for exam_4_5_6_7_8 (1) - EXAM 2 Practice...

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