FIN 540 FINAL EXAM

Aug 9th, 2016
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Question 1 1. Which is the best measure of risk for an asset held in isolation, and which is the best measure for an asset held in a diversified portfolio? Answer Variance; correlation coefficient. Standard deviation; correlation coefficient. Beta; variance. Coefficient of variation; beta. Beta; beta. 8 points Question 2 1. Which of the following statements about pension plans if any, is incorrect? Answer A defined contribution plan is, in effect, a savings plan that is funded by employers, although many plans also permit additional contributions by employees. Under a defined benefit plan, the employer agrees to give retirees a specifically defined benefit, such as $500 per month or 50 percent of the employee’s final salary. A portable pension plan is one that an employee can carry from one employer to another. An employer’s obligation is satisfied under a defined contribution plan when it makes the required contributions to the plan. The risk of inadequate investment

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FIN 540 FINAL EXAMQuestion 11. Which is the best measure of risk for an asset held in isolation, and which is the best measurefor an asset held in a diversified portfolio?AnswerVariance; correlation coefficient.Standard deviation; correlation coefficient.Beta; variance.Coefficient of variation; beta.Beta; beta.8 pointsQuestion 21. Which of the following statements about pension plans if any, is incorrect?AnswerA defined contribution plan is, in effect, a savings plan that is funded by employers, althoughmany plans also permit additional contributions by employees.Under a defined benefit plan, the employer agrees to give retirees a specifically defined benefit,such as $500 per month or 50 percent of the employees final salary.A portable pension plan is one that an employee can carry from one employer to another.An employers obligation is satisfied under a defined contribution plan when it makes therequired contributions to the plan. The risk of inadequate investment returns is borne by theemployee.If assets exceed the present value of benefits, the pension plan is fully funded.8 pointsQuestion 31. You have the following data on three stocks:Stock Standard Deviation BetaA 0.15 0.79B 0.25 0.61C 0.20 1.29As a risk minimizer, you would choose Stock if it is to be held in isolation and Stock if it is to beheld as part of a well-diversified portfolio.AnswerA; A.A; B.B; C.C; A.C; B.8 pointsQuestion 41. Which of the following statements co

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