BFIN 300 Test 1 Concept Exam Questions With Solutions
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Module
BFIN300
Institution
BFIN300
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...
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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