c5 Key
1. A T-bill pays 6 percent rate of return. Would risk-averse investors invest in a risky
portfolio that pays 12 percent with a probability of 40 percent or 2 percent with a
probability of 60 percent? A. Yes, because they are rewarded with a risk pr
c6 Key
1. Market risk is also referred to as A. systematic risk, diversifiable risk.B. systematic
risk, nondiversifiable risk.C. unique risk, nondiversifiable risk.D. unique risk, diversifiable
risk.E. firm-specific risk.
Market, systematic, and nondivers
c7 Key
1. In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of risk
is A. unique risk.B. beta.C. standard deviation of returns.D. variance of returns.E. none of
these.
Once, a portfolio is diversified, the only risk remaining i
c3 Key
1. A purchase of a new issue of stock takes place A. in the secondary market.B. in the
primary market.C. usually with the assistance of an investment banker or dealer.D. a and
c.E. b and c.
Funds from the sale of new issues flow to the issuing corp
c2 Key
1. Which of the following is not a characteristic of a money market instrument?
A. liquidityB. marketabilityC. long maturityD. liquidity premiumE. Both long maturity and
liquidity premium
Money market instruments are short-term instruments with hig
c10 Key
1. Conventional theories presume that investors _, and behavioural finance
presumes that they _. A. are irrational; are irrationalB. are rational; may not
be rationalC. are rational; are rationalD. may not be rational; may not be rationalE. may
no
c1 Key
1. The means by which individuals hold their claims on real assets in a well-developed
economy are A. investment assets.B. depository assets.C. derivative assets.D. financial
assets.E. exchange-driven assets.
Financial assets allocate the wealth of
c9 Key
1. If you believe in the _ form of the EMH, you believe that stock prices reflect all
relevant information including historical stock prices and current public information
about the firm, but not information that is available only to insiders. A. s
c11
Student: _
1. The expected return/beta relationship is used _.
A. by regulatory commissions in determining the costs of capital for regulated firms
B. in court rulings to determine discount rates to evaluate claims of lost future incomes
C. to advise
Ch1
2.
a.
The bank loan is a financial liability for Lanni. (Lannis IOU is the banks
financial asset). The cash Lanni receives is a financial asset. The new financial
asset created is Lannis promissory note (i.e., Lannis IOU to the bank).
b. Lanni transfe
Ch4
E(r) = = .35 44% + .30 14% + .35 (16%) = 14%
5.
Variance = .35 (44 14)2 + .30 (14 14)2 + .35 (16 14)2 = 630
Standard deviation = 25.10%
The mean is unchanged, but the standard deviation has increased, as the probabilities of
higher and lower returns h
Formula Sheet
m
APR m
EAR 1
1
m
APR f
EPR 1
1
m
Geometric average return = 1R 1R . 1 R
1
Ex Post Var(R)
R
j
2
2
1/ T 1
t
2
j
R
T 1
P
Ex Ante j R j E(R j )
j 2j
j
j
2
2
E(R p ) W1 E(R1 ) W2 E(R2 ) . Wn E(Rn )
2
p
w
2
2
A
A
w
2
2
B
B
2
2 wA wB COV
10/24/2016
General Information
The midterm will be held on Friday Oct 28, 2016 from 1pm to
3pm.
The location is Burke Building Theatre-A
MIDTERM REVIEW
Students are responsible for the materials covered in class,
notes, textbook, quiz, assignments and
09/22/2016
Outline
Determinants of Interest Rates
RISK AND RETURN
Rates of return for different holding periods
Risk and Risk Premiums
Estimation of return and risk
Normal distribution and historical records
11 FIN4466
Investments
Dr. Liqiang Chen
Fa
11/19/2016
Outline
Concept of Market Efficiency
Random Walk
MARKET EFFICIENCY
Efficient Market Hypothesis (EMH)
Empirical Tests of Market Efficiency
Test of weak form efficiency
Test of semi-strong form efficiency
Test of strong form efficiency
St
11/5/2016
Outline
CAPM, INDEX MODEL
AND APT
Systematic Risk vs. Unsystematic Risk
Beta
Capital Asset Price Model
Security Market Line (SML)
Index Model
Arbitrage pricing theory
Dr. Liqiang Chen
11 FIN4466
Investments
Systematic and Unsystematic Risk
9/7/2016
Outline
FINANCIAL
INSTRUMENTS AND
MARKETS
A Brief History of U.S. Stock Market
The Economy of Investments
Financial Instruments
Financial Markets
11 FIN4466
Investments
Dr. Liqiang Chen
A short history of investing
Dr. Liqiang Chen
The Econom
10/1/2016
Outline
Risk aversion
Mean-variance utility
Risky assets allocation
Allocation with one risky and one risk-free asset
RISK AVERSION AND
ASSET ALLOCATION
11 FIN4466
Investments
Dr. Liqiang Chen
Investment Decisions Under
Uncertainty
Investmen
10/11/2016
Outline
Diversification and portfolio risk
Allocation with two risky assets
Extending to N risky assets
The Markowitz portfolio optimization model
Minimum variance frontier
Minimum variance portfolio
OPTIMAL RISKY
PORTFOLIO
11 FIN4466
Inv
c4 Key
1. Over the past year you earned a nominal rate of interest of 10 percent on your money.
The inflation rate was 5 percent over the same period. The exact actual growth rate of
your purchasing power was A. 15.5%.B. 10.0%.C. 5.0%.D. 4.8%.E. 15.0%
r =
c8 Key
1. As diversification increases, the total variance of a portfolio approaches _.
A. 0B. 1C. the variance of the market portfolioD. infinityE. none of these
As more and more securities are added to the portfolio, unsystematic risk decreases and
most
Name(Print):
ID: A_
Exam 2
FINA4466: Investments Winter 2016-17
Instructor: George Ye
Instructions:
1) Write your name and student ID on the cover page and score card.
2) You are not allowed to use any electronic device with communication function as
a ca
Name(Print):
ID: A_
Exam 1
FINA4466: Investments Winter 2016-17
Instructor: George Ye
You have 1 hour and 15 minutes to complete this exam.
I have neither given, nor received any help, will not give any help, and I have followed
and will continue to follo
CHAPTER4
RETURNANDRISK:ANALYZINGTHEHISTORICALRECORD
1. Your holding period return for the next year on the money market fund depends
on what 30-day interest rates will be each month when it is time to roll over
maturing securities. The one-year savings de
CHAPTER12
BONDPRICESANDYIELDS
1. a. Catastrophe bondA bond that allows the issuer to transfer catastrophe
risk from the firm to the capital markets. Investors in these bonds receive a
compensation for taking on the risk in the form of higher coupon rates.
CHAPTER15
MACROECONOMICANDINDUSTRYANALYSIS
1. Expansionary (looser) monetary policy to lower interest rates would stimulate
both investment and expenditures on consumer durables. Expansionary fiscal
policy (i.e., lower taxes, increased government spending