FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 17: Financial Economics

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

The type of risk that pushes the returns from all investment in the same direction at the same time is:

A) Idiosyncratic
B) Diversifiable
C) Systemic
D) Time preference

E) B) and C)
F) A) and B)

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

Short-term U.S. government securities are practically risk-free and thus their rates of return are payments solely for:

A) Diversifiable risk
B) Time preference
C) Idiosyncratic risk
D) Pure profit

E) All of the above
F) None of the above

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

Tracy won a $100 million jackpot. She can receive the jackpot as a $5 million payment each year for 20 years, or she can ask to receive the present value of all those payments all at once now. Assume an annual interest rate of 5 percent. If she decides to take the present value payment, about how much will she receive?

Risk in financial economics refers mainly to the chance that an investment could lose value.

Matt, a star basketball player, is looking to join a new NBA team. The Bulls are offering him $24 million for one year. The Heat is offering him $10 million this year and $7.0 million in each of the next two years. The market interest rate is 5 percent. What is the present value of the offer from The Heat in millions (rounded to the nearest one hundred thousand dollars) ?

The so-called market portfolio used as a benchmark in financial economics is:

Which one of the following is a feature of all investments?

Stocks represent a debt, and buyers of stock expect to earn interest.

A manufacturing firm takes out a $500,000 loan to expand its plant. The loan has an annual interest rate of 7 percent. What would be the total compounded interest on the loan at the end of five years, excluding the principal?

You deposit $5,000 into a 10-year bank CD that pays 6.5% annual compound interest rate. When the CD matures in 10 years, you will get more than $9,000 from it.

A key reason that actively managed funds have lower returns than index funds with a similar level of risk is that:

Investors evaluate an investment by estimating its average expected rate of return, and this estimation process assigns higher weights to:

Joseph is considering purchasing a condo. He has the option of buying one in Midtown with a present value of $150,000 or one in downtown with a future value of $200,000. If the current market interest rate is 5 percent and he wants to buy the home with the highest future value in 5 years, he should buy the condo in downtown.

Susan recently purchased a home for $150,000. She plans to rent it out for $1,000 per month for a year. Had the house cost $200,000 instead, her expected rate of return would have:

Refer to the graph above. The point Y represents the:

If an amount "$AAA" today earns interest at a rate of "i"% per year, then the accumulated amount at the end of "n" years will be:

You believe that a certain asset, like a business or shop, is going to be worth $100 million in five years. If the interest rate is 5%, then that asset will be worth $75 million today.

People tend to be impatient, and they typically prefer to:

When the Securities Market Line shifts up, the average expected rate of return on investment assets with given risk levels is increasing.

One asset has a beta of 1.5 and another asset has a beta of 0.75. The difference in beta mean that the asset with a beta of 0.75 has: