Risk and Return Measures - Sample Questions 27 - 31
- Cost of capital:
- Is referred to the capitalization rate in the real estate valuation process.
- Represents the required rate of return for a project.
- May be derived using the capital asset pricing model.
- All of the foregoing.
- The capitalized earnings valuation method may be used to appraise the worth of:
- Common stock.
- Step-up notes.
- Preferred stock and real estate.
- Mortgage backed securities.
- If a bond's yield declines from 6.3% to 4.9% and its price increases 6.5%, then its duration is:
- Either a or b
- Inputs to the constant growth dividend model include all of the following, except:
- The risk-free rate.
- The current yield on corporate bonds of similar maturity.
- The company's dividend stream.
- The beta of the stock being evaluated.
- The projected earnings growth rate.
- With respect to duration, which of the following definitions correct?
- The degree of a bond's volatility in response to interest rate fluctuations.
- How quickly the creditor expects to be repaid.
- Of two bonds with identical maturities, the more highly rated paper has the lower duration.
- Comparing two bonds of equal maturity, the zero coupon bond has the longer duration.
- I, II, III
- III, IV
- I, II, IV
- I, II, III, IV
ProfessionalsPractice Questions 10 - 13
ProfessionalsUnderstanding duration helps to determine a bond's price volatility.
Bonds & Fixed IncomeThe term duration has a special meaning in the context of bonds. It is a measurement of how long, in years, it takes for the price of a bond to be repaid by its internal cash flows. It is an ...
ProfessionalsFINRA Series 6 Exam Study Guide - Yield Terms. This section distinguishes three types of yield calculations for bonds.
Financial AdvisorsFinancial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.
InvestingWhile recent market volatility is leading investors to look for the nearest exit, here are some suggestions for bond exposure in attractive sectors.
ProfessionalsNASAA Series 65: Section 16 Bond Risks and Duration. In this section types of bond risks and duration.
Bonds & Fixed IncomeFind out how this measure can help fixed-income investors manage their portfolios.
EconomicsLearn how an increase in the federal funds rate may impact a bond portfolio. Read about how investors can use the duration of their portfolio to reduce risk.
ProfessionalsFINRA/NASAA Series 66: Section 5 Duration and Stock Risks. This section discusses duration and risks associated with investing in the stock markets: systematic, unsystematic, business, regulatory ...
A measure of the sensitivity of the price (the value of principal) ...
Dollar duration measures the dollar change in a bond's value ...
A debt investment in which an investor loans money to an entity ...
A duration calculation for bonds with embedded options. Effective ...
The remaining life of a financial instrument. In bonds, it is ...
The calculation of a bond's duration based on historical data. ...
The correct answer is a. I should be the the other way around: convertible bond holders can exchange their bonds for shares. ... Read Answer >>
The correct answer is c. Zero coupon bonds, as the name implies, pay no interest or coupon payments. They are bought (and ... Read Answer >>
Learn how duration for a bond fund measures the risk the bond portfolio has to a rise in interest rates, and see how managers ... Read Answer >>
Learn how the concept of duration is used to determine when future cash flows for a bond will equal the amount paid for the ... Read Answer >>
The correct answer is d) Hedge funds are extremely aggressive entities that engage in margin and short-selling. They are ... Read Answer >>
I. Moral suasionII. Changing the discount rateIII. Changing the reserve requirementIV. Changing the prime interest rate A. ... Read Answer >>