Question : 32.The additional return offered by a more risky investment relative : 1325685

 

 

32.The additional return offered by a more risky investment relative to a safer one is called

a.the risk-free rate.

b.the risky return.

c.the risk premium.

d.the insurance premium.

 

 

 

33.You are analyzing the performance of different asset classes for a foreign economy. You find that over the last 60 years the average annual return for equities was 12% while that of corporate bonds was 10% and the rate of inflation was about 3%. If inflation were projected to be around 1% for the foreseeable future, then what would you project the return of equities to be during that same foreseeable period?

a.12%

b.11%

c.10%

d.9%

 

 

 

 

34.The statistical term, variance is defined as

a.the expected value of deviations from the mean.

b.the expected value of squared deviations from the mean.

c.the sum of squared deviations from the mean.

d.the sum of squared deviations from the mean divided by the number of observations available.

 

 

 

35.You are introduced to an investment that has an expected return of 20% equal to the standard deviation of the distribution of returns. What is the probability that the investment will lose some of your initial investment in the first year?

a.50%

b.34%

c.16%

d.unable to determine from the information given

 

 

 

36.You are introduced to an investment that has an expected return of 20% equal to the standard deviation of the distribution of returns. What is the probability that the investment will have a return less than 20% in the first year? Assume a normal distribution.

a.0%

b.50%

c.68%

d.not enough information to determine

 

 

 

37.Your family has invested in a security over the last 100 years. The expected return during that period has been .15 and the variance of the returns has been .048. Your investment advisor told you that the security had a 95th percentile performance (with respect to its historical performance) this period. What was the actual return during the period?

a.15.0%

b.19.8%

c.37.0%

d.58.8%

 

 

 

38.Over the last 3 years you have earned 5%, 7%, and 9% on your portfolio. What is the standard deviation of the returns of that portfolio?

a..07

b..02

c..0004

d.none of the above

 

 

 

39.You have it on good account that the probability of good returns on energy investments is equal to that of poor returns. If we define good returns as 100% while that of poor returns is 50%, then what is the probability of getting an exact return of 75% in the next year?

a.50%

b.25%

c.0%

d.there is not enough information to solve the problem.

 

 

 

 

40.If you were to plot the return of asset classes on a graph with the standard deviation of returns on the horizontal axis and expected returns on the vertical axis, then which security class is most likely to be in the farthest upper right hand corner of the graph?

a.Treasury Bills

b.Treasury Bonds

c.Corporate Bonds

d.Stocks

 

 

 

41.Which of the following asset classes would give you the greatest probability of achieving a return that is closest to its expected return?

a.Treasury Bills

b.Treasury Bonds

c.Corporate Bonds

d.Stocks