FIN 550 MIDTERM EXAM

Aug 9th, 2016
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Question 1 The uncertainty of investment returns associated with how a firm finances its investments is known as Answer Business risk. Liquidity risk. Exchange rate risk. Financial risk. Market risk. 5 points Question 2 Measures of risk for an investment include Answer Variance of returns and business risk Coefficient of variation of returns and financial risk Business risk and financial risk Variance of returns and coefficient of variation of returns Question 3 In the phrase "nominal risk free rate," nominal means Answer Computed. Historical. Market. Average. Risk adverse. Question 4 All of the following are major sources of uncertainty EXCEPT Answer Business risk Financial risk Default risk Country risk Liquidity risk Question 5 For an investor with a time horizon of 12 years and higher risk tolerance, an appropriate asset allocation strategy would be Answer 100% stocks 30% cash, 50% bonds, and 20% stocks 10% cash, 30% bonds, and 60% sto

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FIN 550 MIDTERM EXAMQuestion 1The uncertainty of investment returns associated with how a firm finances its investments isknown asAnswerBusiness risk.Liquidity risk.Exchange rate risk.Financial risk.Market risk.5 pointsQuestion 2Measures of risk for an investment includeAnswerVariance of returns and business riskCoefficient of variation of returns and financial riskBusiness risk and financial riskVariance of returns and coefficient of variation of returnsQuestion 3In the phrase "nominal risk free rate," nominal meansAnswerComputed.Historical.Market.Average.Risk adverse.Question 4All of the following are major sources of uncertainty EXCEPTAnswerBusiness riskFinancial riskDefault riskCountry riskLiquidity riskQuestion 5For an investor with a time horizon of 12 years and higher risk tolerance, an appropriate assetallocation strategy would beAnswer100% stocks30% cash, 50% bonds, and 20% stocks10% cash, 30% bonds, and 60% stocks50% bonds and 50% stocks100% bonds5 pointsQuestion 6Which of the following is not a step in the portfolio management process?AnswerDevelop a policy statement.Study current financial and economic conditions.Construct the portfolio.Monitor investor's needs and market conditions.Sell all assets and reinvestment proceeds at least once a year.Question 7____ phase is the stage when investors in their early-to-middle earning years attempt toaccumulate assets to satisfy near-term needs, e.g., children's educat

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