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BFIN 300 Test 1 Concept Exam Questions With Solutions
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BFIN 300 Test 1 Concept Exam Questions With Solutions The minimum return an investor expects to earn for being willing to forego consumption today is the: A) risk-free rate. B) real rate. C) risk premium. A) risk-free rate. The Capital Market Line defines those portfolios that: A) optimiz...

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  • October 13, 2024
  • 16
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • questions with solutions
  • bfin 300 test 1 concept exam

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BFIN 300 Test 1 Concept Exam Questions
With Solutions

The minimum return an investor expects to earn for being willing to forego consumption today is

the:




A) risk-free rate.

B) real rate.


C) risk premium. A) risk-free rate.




The Capital Market Line defines those portfolios that:




A) optimize the risk-return trade-off.

B) maintain risk for a given level of return.


C) are inefficient. A) optimize the risk-return trade-off.




A bond selling at a _______________ has a coupon rate _____________ than its yield to

maturity.




A) premium, higher

, BFIN 300 Test 1 Concept Exam Questions
With Solutions
B) premium, lower


C) discount, higher A) premium, higher




The underlying assumption of the dividend growth model is that a stock is worth:




A) the present value of the future income which the stock generates.

B) an amount computed as the next annual dividend divided by the required rate of return.

C) the same amount as any other stock that pays the same current dividend and has the same

required rate of return. A) the present value of the future income which the stock

generates.




For a diversified investor, the primary risk the portfolio is subject to is the:




A) systemic risk.

B) systematic risk.


C) specific risk. B) systematic risk.




The Fisher effect explains the relationship between:

, BFIN 300 Test 1 Concept Exam Questions
With Solutions

A) nominal rates, real rates, and expected inflation.

B) interest rates and time to maturity.


C) the risk-free rate and risk premiums. A) nominal rates, real rates, and expected

inflation.




Assume you are using the dividend growth model to value stocks. If you expect the inflation rate

to increase, you should also expect:




A) stocks that do not pay dividends to decrease in price while the dividend-paying stocks

maintain a constant price.

B) market values of all stocks to remain constant as the dividend growth will offset the increase

in inflation.


C) market values of all stocks to decrease, all else constant. C) market values of all stocks

to decrease, all else constant.




. Estimates using the arithmetic average will probably tend to ___________ values over the long-

term while estimates using the geometric average will probably tend to _______ values over the

short-term.

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