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Chapter 10

Question 1 of 28

1

Two of the most important financial analysis concepts are __ & ___

Select one or more of the following:

  • risk

  • assets

  • return

  • equity

  • investing

  • revenues

Explanation

Question 2 of 28

1

''financial risk'' is present whenever there is some chance of earning a return on an investment that is ____ than the amount expected.

Select one of the following:

  • less

  • more

Explanation

Question 3 of 28

1

the greater the probability of a return ''far below'' that anticipated, the ___ the risk

Select one of the following:

  • lesser

  • greater

Explanation

Question 4 of 28

1

choose 3.
in their attitude towards investment risk, investors can be

Select one or more of the following:

  • risk neutral

  • risk dependent

  • risk independent

  • risk takers

  • risk averse

  • risk seeking

  • risk buyers

Explanation

Question 5 of 28

1

Most investors are ''risk averse'' which means that ___ risk investments require ___ rates of return

it is risk aversion that makes risk concepts so important to financial decision making

Select one of the following:

  • higher, higher

  • higher, lower

  • lower, higher

Explanation

Question 6 of 28

1

the chance that an event will occur is called its ___ of ___, or just probability

Select one of the following:

  • probability of randomness

  • probability of earnings

  • probability of occurence

Explanation

Question 7 of 28

1

a ''probability _____'' lists all possible event outcomes along with their probabilities

Select one of the following:

  • probability distribution

  • probability effect

  • probability toss

Explanation

Question 8 of 28

1

example, a probability distribution a coin toss:

Select one of the following:

  • outcome: head and tail
    probability .50 or 50% and .50 or 50%

  • outcome: head and tail
    probability .3939249

Explanation

Question 9 of 28

1

very poor .10 [-10% -20%]
poor .20 [0 0]
average .40 [10 15]
good .20 [20 30]
very good .10 [30 50]

Select one of the following:

  • True
  • False

Explanation

Question 10 of 28

1

''expected rate of return'' is estimated ___ an investment is made

Select one of the following:

  • before

  • ater

Explanation

Question 11 of 28

1

after the fact, the return that is actually achieved is called ____ rate of return

Select one of the following:

  • expected rate of return

  • realized rate of return

Explanation

Question 12 of 28

1

when risk is present, the realized rate of return _____ equals the expected rate of return

rarely

Select one of the following:

  • True
  • False

Explanation

Question 13 of 28

1

''stand alone risk'' is defined and measured assuming an investment will be held in ____

Select one of the following:

  • together

  • isolation

  • an organization

Explanation

Question 14 of 28

1

stand alone risk can be measured by the degree of ____

Select one of the following:

  • tightness

  • how loose it is

Explanation

Question 15 of 28

1

common measure of ''stand alone risk'' is the ____ ___, usually represented by a lower case sigma ___

Select one or more of the following:

  • high risk

  • standard deviation

  • a

  • o

  • b

Explanation

Question 16 of 28

1

what is CV?

Select one of the following:

  • coefficient of variation

  • coefficient of variables

  • coefficient of variance

Explanation

Question 17 of 28

1

the coefficient of variables (cv) is defined as the standard deviation divided by the expected rate of return
for example: CV mri == 11%/10% = 1.1

it is a _____ measure _____ risk

Select one or more of the following:

  • standardized measure

  • frequent measure

  • variance measure

  • stand alone risk

  • high risk

  • lower risk

  • independent risk

Explanation

Question 18 of 28

1

which is riskier?
CV mri = 11%/10% = 1.1
CV clinic = 18%/15%= 1.2

indicates that the clinic investment is riskier than the MRI investment

CV is most useful when comparing investments with widely different returns

Select one of the following:

  • True
  • False

Explanation

Question 19 of 28

1

standard deviation (cv) is an applicable risk measure _____ when an investment is held in ______

Select one of the following:

  • only, isolation

  • not, place

  • only, place

Explanation

Question 20 of 28

1

most investments are held as part of a collection, or _____, of investments

Select one of the following:

  • paper

  • watches

  • portfolio

  • documents

  • computer

Explanation

Question 21 of 28

1

when investments are held in ''portfolios'', the relevant return, and hence risk, is that of the _____ portfolio

Select one of the following:

  • one portfolio

  • old portfolio

  • entire portfolio

Explanation

Question 22 of 28

1

A, B, C, D (Referring to slide 10-14) are single assets
AB, AC, AD are equal weighted aka 50/50 portfolios of those single assets

Select one of the following:

  • True
  • False

Explanation

Question 23 of 28

1

''expected rate of return on a portfolio'' is merely the ___ average

Select one of the following:

  • highest average

  • lowest average

  • unweighted average

  • weighted average

  • better average

  • fastest average

Explanation

Question 24 of 28

1

a ''portfolio's return'' is simply the ''weighted average'' of the returns of the components

however, a ''portfolio's risk'' which is typically measured by standard deviation is ''_____'' the ____weighted______ average of the component of standard deviations

it depends on the ___ among the returns of the portfolio's components

Select one or more of the following:

  • NOT

  • definitely

  • perspective

  • decision

  • relationship

Explanation

Question 25 of 28

1

the movement relationship between _____ variable (s) is called _____

Select one or more of the following:

  • one

  • two

  • three

  • more

  • financial risk

  • rates of return

  • correlation

Explanation

Question 26 of 28

1

correlatoin is measured by the ''correlation efficient'', _

Select one of the following:

  • m

  • p

  • q

  • r

  • d

  • a

  • o

Explanation

Question 27 of 28

1

r = +1 : perfect positive correlation

r = -1: perfect negative correlation

r= 0 : zero correlation

Select one of the following:

  • True
  • False

Explanation

Question 28 of 28

1

it is ''difficult'' to generalize about correlations among investment returns.

however, it is ___ (if not ___ ) to find r = +1 , r = -1, or even r = 0

the correlation between 2 randomly chosen investments is likely to range from +0.4 to + 0.8

''why?''

Select one of the following:

  • always, possible

  • unique, impossible

  • certain, possible

  • rare, impossible

  • necessary, impossible

Explanation

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