Question : 41.Which of the following asset classes would give you the : 1404057

 

 

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

 

 

 

42.You are presented with 4 distinct investment opportunities involving a Treasury Bill, a Treasury Bond, a Corporate Bond, and a Stock. You are told that each of these investments are expected to produce (after the cash is paid out then no other cash flows are anticipated) $100 one year from now. Which asset should be the least expensive today, in terms of dollars that you will have to pay for the asset?

a.Treasury Bills

b.Treasury Bonds

c.Corporate Bonds

d.Stocks

 

 

 

43.If the standard deviation of a diversified portfolio is 20% and if the stocks in that portfolio are positively correlated, then what would we expect the average standard deviation of stocks in that portfolio to be?

a.less than 20%

b.20%

c.greater than 20%

d.you would need to know the percentage of each stock invested in that portfolio to determine the answer

 

 

 

44.If we are able to eliminate all of the unsystematic risk in a portfolio then, what is the result?

a.a risk-free portfolio

b.a portfolio that contains only systematic risk

c.a portfolio that has an expected return of zero

d.such a portfolio cannot be constructed since there will always be unsystematic risk in any portfolio

 

 

 

45.Stock X has 3 units of systematic risk and 2 units of unsystematic risk while Stock Y has 3 units of systematic risk and 4 units of unsystematic risk. If Stock X is priced to generate an 8% return for investors then what do we know about the return that Stock Y should be priced to return?

a.Stock Y should be priced to return greater than 8%

b.Stock Y should be priced to return 8%

c.Stock Y should be priced to return less than 8%

d.there is not enough information to solve this problem

 

 

 

46.Based upon the following levels of risk, which stock should have the highest price if each stock is expected to produce the same level of cash over the future life of each asset?

 

Systematic risk unitsUnsystematic risk units

Stock A103

Stock B125

Stock C5300

 

a.Stock A

b.Stock B

c.Stock C

d.there is not enough information to decide

 

 

 

47.You have the choice of introducing either Stock X or Stock Y into your fully diversified portfolio. Both stocks have 5 units of systematic risk while Stock X has 6 units of unsystematic risk and Stock Y has 8 units of unsystematic risk. Which stock offers the greatest opportunity from diversification?

a.Stock X

b.Stock Y

c.both stock offer the same opportunity

d.there is not enough information to determine the answer

 

 

 

NARRBEGIN: Hillary

Hillary Investments

Between 1999 and 2003, Hillary Investments has produced returns as follows:

 

19998%

20003%

2001-1%

2002-5%

2003-3%

 

NARREND

 

 

48.Calculate the expected return for Hillary Investments.

a..003

b..004

c..005

d..006

 

 

 

49.What is the variance of the return of Hillary Investments?

a..01072

b..00268

c..00214

d.none of the above

 

 

 

Exhibit 6-1

Suppose that an investor bought a bond last year for $980. The bond pays a 7% annual coupon and has a face value of $1,000. Today, the same bond is selling for $960.

NARREND

 

 

50.Refer to Exhibit 6-1. If the investor sells the bond this morning, what is the total dollar return of the investment?

a.-$40

b.$30

c.$50

d.$70