Exam (elaborations)
CRPC -Module 2
- Module
- ITM C954 Combo.
- Institution
- ITM C954 Combo.
Exam of 8 pages for the course ITM C954 Combo. at ITM C954 Combo. (CRPC -Module 2)
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CRPC -Module 2Fund JKL has a mean return of 8% and a standard deviation of 12, and its returns are
evenly distributed.
This would mean that 68% of the time its returns would fall between
a. -4% and +20%
b. +4% and +20%
c. -8% and +8%
d. -16% and +32% - ANS-a. -4% and +20%
Assuming the market is currently returning 12% and the beta of your stock is .8.
What percentage return can you expect on your stock?
a. 2.4%
b. 8.0%
c. 9.6%
d. 14.4% - ANS-c. 9.6%
Jezebel owns four stocks in various industries. She has come to you to assess the risk
she is taking.
You inform her that her portfolio is subject to which one of the following types of risk,
and why?
a. purchasing power risk, because stocks fluctuate with inflation.
b. systematic risk, because the stocks she owns are in various industries.
c. political risk, since companies are subject to the laws of the countries in which they
operate
d. unsystematic risk, because she owns only four stocks. - ANS-d. unsystematic risk,
because she owns only four stocks.
Which one of the following statements is correct?
a. Reinvestment, exchange rate, and liquidity risk are examples of systematic risk.
b. Default, purchasing power, and political risk are examples of nondiversifiable risk.
, c. A company without debt will have no financial risk, but will have business risk, which
is a type of unsystematic risk.
d. Default, call, and liquidity risk are unique to bonds and not applicable to stocks. -
ANS-c. A company without debt will have no financial risk, but will have business risk,
which is a type of unsystematic risk.
Beta is a measure of a stock's
a. range of returns
b. total risk
c. variability
d. volatility - ANS-d. volatility
Hector has been investing for years, and has approximately three quarters of his
portfolio invested in stock index and bond index funds, which he rebalances periodically.
He has the remainder of his portfolio invested in oil and health care stocks, which he
believes provide above-average price appreciation potential over the next few years.
His style of asset allocation would be best described as
a. strategic
b. tactical
c. dynamic
d. core/satellite - ANS-d. core/satellite
An investor has a 6%, $10,000 par value bond that matures in 15 years. The yield to
maturity on similar bonds currently is 5.5%.
What is the price of this bond?
a. $1,050.62
b. $5,779.16
c. $9,509.99
d. $10, 506.23 - ANS-d. $10, 506.23
Rex owns a corporate bond that currently sells for $1,090. The coupon rate is 9%, and
the bond matures in 23 years. The bond is callable in eight years at $1,020.
What is the yield to call of this bond?
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