Risk and Return Measures - Sample Questions 1 - 5

  1. With respect to the internal rate of return on an investment (IRR):
    1. It is the weighted average term to maturity of a bond's cash flows.
    2. It strips out the cash flow bias for an investment's return.
    3. It is a simple period return.
    4. It is a dollar weighted return which assumes reinvestment at the IRR to maturity.
  2. All of the following are forms of dollar weighted return, except:
    1. Yield to Maturity.
    2. Yield to Call.
    3. Internal Rate of Return.
    4. None of the foregoing.
  3. The current yield of Varity Corp. 9.07 of 20 is:
    1. 9.07%
    2. 8.9% if Varity's current market value is 102
    3. 10.4% if Varity trades presently at 874
    4. a & c
    5. b & c
  4. Taxable Equivalent Yield may be defined as:
    1. The different between a tax-exempt yield and a taxable yield.
    2. The rate at which the investor would be indifferent to the tax-exempt yield.
    3. The yield obtained by "grossing up" the tax-exempt yield by the reciprocal of the investor's marginal tax bracket.
    4. Both b & c
    5. None of the foregoing.
  5. The nominal return on an investment is 11.34%. The real return is:
    1. The nominal return adjusted for inflation.
    2. 7.57% using a 3% inflation assumption.
    3. 7.57% using a 3.5% inflation assumption.
    4. Both a & c
Sample Questions 6 - 10
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