11 May Question(TCO 8) Over the period of 1955-2006:
Question
(TCO 8) Over the period of 1955-2006:
Student Answer: long-term government bonds underperformed large corporate stocks.
small-company stocks underperformed large-company stocks.
inflation exceeded the rate of return on U.S. Treasury bills.
U.S. Treasury bills outperformed long-term government bonds.
Question 2. Question :
(TCO 8) If the financial markets are efficient, then:
Student Answer: stock prices should never change.
stock prices should only respond to unexpected news and events.
stock prices should increase or decrease slowly as new events are analyzed and the information is absorbed by the markets.
stock prices will only change when an event actually occurs, not at the time the event is anticipated.
Question 3. Question :
(TCO 8) Which of the following statements is false regarding systematic risk? Select all that apply:
Student Answer: is always diversifiable
is the total risk associated with surprise events
affects only a specific project or firm
is measured by standard deviation
Question 4. Question :
(TCO 8) Assume a project that has the following returns for years 1 to 5: 15%, 4%, -13%, 34%, and 17%. What is the approximate standard deviation of this investment?
Student Answer: 0.03013
0.1542
17%
20%
Question 5. Question :
(TCO 8) Assume you are considering investing in two stocks, A & B. Stock A has an expected return of 16% and Stock B has an expected return of 9.5%. Your goal is to create a two-security portfolio that will have an expected return of 12%. If you have $250,000 to invest today, approximately how much would you invest in Stock B?
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