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