Financial Management - Study Mode

[#771] Markowitz's main contribution to portfolio theory is___________.
Correct Answer

(D) insight about the relative importance of variances and co variances in determining portfolio risk

Explanation

Solution: Markowitz's main contribution to portfolio theory is insight about the relative importance of variances and co variances in determining portfolio risk.

[#772] Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are______________.
Correct Answer

(A) perfectly positively correlated with each other

Explanation

Solution: Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are perfectly positively correlated with each other. The term "security" is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation via stock a creditor relationship with a governmental body or a corporation represented by owning that entity's bond or rights to ownership as represented by an option.

[#773] The market price of a share of common stock is determined by ___________.
Correct Answer

(D) individuals buying and selling the stock

Explanation

Solution: The market price of a share of common stock is determined by individuals buying and selling the stock. The market value per share or fair market value of a stock is the price that a stock can be readily bought or sold in the current market place.

[#774] Dividend expected on stock during coming year is classified as
Correct Answer

(B) expected dividend yield

Explanation

Solution: Dividend expected on stock during coming year is classified as expected dividend yield. Dividend yield ratio is a measure of the productivity of your investment.

[#775] In expected rate of return for constant growth, capital gains is divided by beginning price to calculate
Correct Answer

(C) yield of capital gains

Explanation

Solution: In expected rate of return for constant growth, capital gains is divided by beginning price to calculate yield of capital gains. A capital gains yield is the rise in the price of a security, such as common stock. For common stock holdings, the CGY is the rise in the stock price divided by the original price of the security.