Financial Management - Study Mode

[#71] An analysis of decision making of investors and managers is classified as
Correct Answer

(B) behavioral finance

Explanation

Solution: An analysis of decision making of investors and managers is classified as behavioral finance. Behavioral finance is the study of the influence of psychology on the behavior of investors or financial analysts. It also includes the subsequent effects on the markets.

[#72] Yield on bond is 7% and market required return is 14% then market risk premium would be
Correct Answer

(D) 7.00%

Explanation

Solution: Market risk premium = Market required return - Yield on bond = 14% - 7% = 7.00%

[#73] An expected rate of return is denoted by
Correct Answer

(C) r-hat

Explanation

Solution: An expected rate of return is denoted by r-hat. In securities trading, the letter R has a special meaning when added to the end of a ticker symbol. The letter R has a different meaning when applied as part of financial formula where it usually means some form of return.

[#74] In expected future returns, tighter probability distribution shows risk on given investment which is
Correct Answer

(A) smaller

Explanation

Solution: In expected future returns, tighter probability distribution shows risk on given investment which is smaller. The return that is expected to be earned on an asset in the future.

[#75] An inflation free rate of return and inflation premium are two components of
Correct Answer

(A) quoted rate

Explanation

Solution: An inflation free rate of return and inflation premium are two components of quoted rate. An inflation free rate of return and inflation premium are two components of quoted rate. A rate expressed on the basis which is conventional in the market in which the parties are dealing or proposing to deal.