Date & Time of Test: 7/17/2012 at 5 pm(central time)Student Login ID & PasswordTime Zone with Country Name: Central time zone, Houston, TexasNumber of MCQs:7Number of questions and Length of short answer (In terms of word limit): N/ANumber of questions and Length Essay (In terms of word limit): N/ANumber of AttemptsTime Range in which test will remain open: 50Duration of online Test: 50Sample questions:The tighter the probabilitydistribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation. (Points : 4)  True   False 2.Date & Time of Test: 7/17/2012 at 5 pm(central time)

Student Login ID & Password

Time Zone with Country Name: Central time zone, Houston, Texas

 

Number of MCQs:7

 

Number of questions and Length of short answer (In terms of word limit): N/A

Number of questions and Length Essay (In terms of word limit): N/A

Number of Attempts

Time Range in which test will remain open: 50

Duration of online Test: 50

Sample questions:

 

 

The tighter the probability

distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation. (Points : 4)  

       True 

       False 

 

  

 

2. Risk-averse investors require

higher rates of return on investments whose returns are highly uncertain, and most investors are risk averse. (Points : 4)  

       True 

       False 

 

  

 

3. Tom O'Brien has a 2-stock portfolio with a total value of $100,000.  $37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42.  What is his portfolio’s beta?

  (Points : 4)  

       1.17

       1.23

       1.29

       1.35

       1.42

 

 

  

 

4. Moerdyk Company's stock has a beta of 1.40, the risk-free rate is 4.25%, and the market risk premium is 5.50%.  What is the firm's required rate of return?

  (Points : 4)  

       11.36%

       11.65%

       11.95%

       12.25%

       12.55%

 

 

  

 

5. Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 5.0%, (4) the firm has a beta of 1.00, and (5) its realized rate of return has averaged 15.0% over the last 5 years. (Points : 4)  

       10.29%

       10.83%

       11.40%

       12.00%

       12.60%

 

 

  

 

6. Nachman Industries just paid a dividend of $1.32.  Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter.  The required return on this low-risk stock is 9.00%.  What is the best estimate of the stock’s current market value? (Points : 4)  

       $41.59

       $42.65

       $43.75

       $44.87

       $45.99

 

  

 

7. The expected return on Natter Corporation’s stock is 14%.  The stock’s dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share.  Which of the following statements is CORRECT? (Points : 4)  

       The stock’s dividend

yield is 7%.

       The stock’s dividend

yield is 8%.

       The current dividend

per share is $4.00.

       The stock price is expected to be $54 a share one year from now.

       The stock price is expected to be $57 a share one year from now.

 

  

 

8. A portfolio's risk is measured by the weighted average of the standard deviations of the securities in the portfolio.  It is this aspect of portfolios that allows investors to combine stocks and thus reduce the riskiness of their portfolios. (Points : 4)  

       True 

       False 

 

  

 

9. Diversification will

normally reduce the riskiness of a portfolio of stocks. (Points : 4)  

       True 

       False 

 

  

 

10. The slope of the SML is determined by investors' aversion to risk.  The greater the average investor's risk aversion, the steeper the SML. (Points : 4)  

       True 

       False