Risk and Return Measures - Sample Questions 6 - 10

  1. If returns are equal for all time periods under consideration, then one may assume that:
    1. The geometric mean will be less than the arithmetic mean.
    2. The arithmetic mean will be less than the geometric mean.
    3. The geometric and arithmetic means will be equal.
    4. None of the foregoing.
  2. ZZZZ Corp has a beginning value of $473, earned 6.9% for the period and had an ending value of $692. Its holding period return is:
    1. 46.3%
    2. 53.2%
    3. Uses Ending Value of Investment-Beginning Value of Investment +/- Cash flows/Beginning Value of Investment as the calculation formula.
    4. both a & c
    5. both b & c
  3. Risk-adjusted return:
    1. Adjusts the return of an investment for inflation.
    2. Adjusts the return of an investment for market risk.
    3. Adjusts the return of an investment for total risk.
    4. Is commonly referred to as the Sharpe ratio.
    5. b & c
  4. City of Industry's General Obligation bonds pay 5.12%. Calculate the taxable equivalent yield for this bond.
    1. 8%
    2. 7.11%
    3. Cannot be determined without the investor's marginal tax bracket.
    4. None of the above.
  5. A bond is currently priced at 107 with three years to maturity and an annual coupon of 6%. Its yield to maturity would be:
    1. 5.61%
    2. Less than the coupon yield.
    3. The weighted average term to maturity of the cash flows multiplied by the coupon.
    4. Its time weighted return.
Sample Questions 11 - 15


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