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
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A measure of the sensitivity of the price (the value of principal) ...
A debt investment in which an investor loans money to an entity ...
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Annual income (interest or dividends) divided by the current ...
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A formula that expresses the measurable change in the value of ...
The correct answer is a. I should be the the other way around: convertible bond holders can exchange their bonds for shares. ... Read Answer >>
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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 >>
The correct answer is B. While local practices of a broker-dealer might require the client to sign the form, even when opening ... Read Answer >>
The correct answer is a. Fixed annuities are not considered securities, since the purchaser bears no investment risk. However, ... Read Answer >>