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FIN 301 Final Exam Questions with Correct Answers
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  • Course
  • FIN 301
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  • FIN 301

low risk investments have... - Answer-lower expected returns high risk investments have... - Answer-higher expected returns the least risky investment - Answer-treasury bills the most risky investment - Answer-small company common stocks price/return volatility is a way to measure? - An...

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  • August 24, 2024
  • 10
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • fin 301 final exam questions with correct answers
  • low risk investments have answer lower expect

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  • FIN 301
  • FIN 301

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FIN 301 Final Exam Questions with
Correct Answers
low risk investments have... - Answer-lower expected returns

high risk investments have... - Answer-higher expected returns

the least risky investment - Answer-treasury bills

the most risky investment - Answer-small company common stocks

price/return volatility is a way to measure? - Answer-risk

a rational investor requires a higher expected return to accept... - Answer-additional risk

model that describes the trade off between risk and return... - Answer-capital asset
pricing model (CAPM)

CAPM equation - Answer-= risk free rate + [Beta * (Market Risk Premium - Return on
Market)]

rate of return equation - Answer-= (cash pmt. + change in price) / price paid

a capital gain/loss is realized when... - Answer-the asset is sold

risk is measured by... - Answer-the possible range of returns around an expected return,
known as the standard deviation

a greater the standard deviation of a stock means... - Answer-more fluctuations and
greater risk

simple averages can be misleading when... - Answer-analyzing returns

_______ or _______ averages are more representative of actual investment
performance - Answer-compound or geometric

simple averages are misleading because... - Answer-they can hide poor performances

relationship between beta and return is... - Answer-positive

stock return estimate equation - Answer-= market return * beta

beta is a measure of... - Answer-market magnification

, systematic risk is measured by... - Answer-beta

the market related risk that you are paid to take is... - Answer-systematic

the risk that cannot be diversified away is... - Answer-systematic

the firm specific risk that affects the return of that firm or industry only is... - Answer-
unsystematic

the risk that can be diversified away is... - Answer-unsystematic

in a diversified portfolio, which risk averages out to be 0? - Answer-unsystematic

which risk are you not paid to take? - Answer-unsystematic

alpha is a measure of... - Answer-performance

alpha equation - Answer-= observed return of asset - expected return of asset

a positive alpha is... - Answer-good

a negative alpha is... - Answer-bad

gross returns are before... - Answer-expenses

net return equation - Answer-= gross returns - expenses

using gross returns, the average mutual fund has an alpha of... - Answer-0%

good performance in the past is not an indicator of... - Answer-good performance in the
future

using net returns, the average mutual fund alpha is... - Answer--1.2%

if a stock is above the risk-return line it is... - Answer-undervalued

if a stock is below the risk-return line it is... - Answer-overvalued

in efficient markets, asset prices react very quickly to the receipt of... - Answer-new info

a market where all investments are accurately priced is called... - Answer-efficient

an efficient capital market means that there are no... - Answer-good or bad investments

in efficient markets, each investment offers an expected return to match... - Answer-its
level of risk

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