risk averse correct answers dont like risk; must get reward to accept risk; most peoples attitude
risk seeker correct answers look for opportunities to take the risk; small percentage of people
risk neutral correct answers focused only on reward; small percentage of people
risk correct ans...
FINC 5310 || All Questions Answered Correctly.
risk averse correct answers dont like risk; must get reward to accept risk; most peoples attitude
risk seeker correct answers look for opportunities to take the risk; small percentage of people
risk neutral correct answers focused only on reward; small percentage of people
risk correct answers possibility that actual out comes will be less than expected
Does a higher variance result in less or greater risk? correct answers greater risk
For risk comparison what are the steps correct answers calculate expected return, variance using
exp return, std deviation of variance and then coefficient of variation using std dev and exp
return
does total risk reduce or increase as we include more stocks in a portfolio correct answers
reduces
Is market risk constant or variable correct answers constant
who created the capital asset pricing model correct answers william sharp
security market line correct answers linear relationship of risk and return
Required rate of return correct answers return needed by investor to accept risk
Beta above market beta correct answers aggressive
Beta below market beta correct answers defensive
Beta portfolio correct answers weighted average of stock in a portfolio
shifts security market line up or down parrellel to sml correct answers inflation
Rm - Rrf correct answers slope of security market line
Risk free rate of return correct answers market risk premium
slope changes to sml correct answers due to market risk/return changes such as investors getting
nervous/scared
People accept more risk to avoid loss than they will to gain correct answers true
efficient market hypothesis correct answers current price is the best estimate of the true value
, Weak form correct answers current price reflects all information contained in past prices - TRUE
Semi-strong form correct answers current price reflects all information that is publically
available and relevant-Mostly true
Strong form correct answers current price reflects all possible info including inside info - false
What affects rate of return correct answers 1. amt of exp cash flow, 2. timing of exp cash flow 3.
riskiness of exp cash flow
Increases to Cash Flow correct answers Operations Net income, depreciation tax shield, incr to
CL, decr to CA (excl cash) Investments: Sales of FA, Decline in loans to others, Sale of stock in
another comp Financial: Incr in Comm Stock, Incr in Non-current liab
uses for cash flow correct answers 1. pay interest on debt, 2. pay principal on debt 3. pay
dividends 4. buy back stock 5. purchase non-operational assets ie mark securities, other company
stock
Market Value Added correct answers difference between total market value and total amount of
investor supplied capital
MVA correct answers (# of shares * price) - total common equity
After tax yield correct answers Bt yield(1-tax bracket)
Before tax yield correct answers At yield/(1-taxbracket)
Dividend income correct answers interest received on another corporations stock - only 30%
taxable
Ratio most used by creditors correct answers Debt ratio = total Debt / total assets
Is a higher inventory turnover ratio better or worse? correct answers Better
Is a lower total asset turnover better or worse? correct answers Worse
equity multiplier correct answers total asset/equity
time Interest earned calculation correct answers EBIT/Int Expense
time interest earned used for? correct answers measures firms ability to pay debt and take on
more
Return on Assets ROA definition correct answers measures cost contol and asset utilization
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