Financial Management - Study Mode

[#816] Relationship between risk free asset and a single risky asset are always
Correct Answer

(A) linear

Explanation

Solution: Relationship between risk free asset and a single risky asset are always linear. The covariance of the risk-free asset with any risky asset or portfolio will always equal zero. Similarly the correlation between any risky asset and the risk-free asset would be zero. Combining a Risk-Free Asset with a Risky Portfolio Expected return: the weighted average of the two returns is a linear relationship.

[#817] Gross domestic product, world economy strength and level of inflation are factors which is used to determine
Correct Answer

(A) market realized return

Explanation

Solution: Gross domestic product, world economy strength and level of inflation are factors which is used to determine market realized return. Realized yield is the actual return earned during the holding period for an investment, and may include dividends, interest payments, and other cash distributions.

[#818] Rational traders immediately sell stock when price is
Correct Answer

(D) too high

Explanation

Solution: Rational traders immediately sell stock when price is too high.

[#819] Stock issued by company have lower rate of return because of
Correct Answer

(B) low book to market ratio

Explanation

Solution: Stock issued by company have lower rate of return because of low book to market ratio. The book-to-market ratio is used to find a company's value by comparing its book value to its market value.

[#820] Riskless rate in addition with risk premium is multiplied by standard deviation of portfolio for using to calculate expected return rate on
Correct Answer

(A) efficient portfolio

Explanation

Solution: Riskless rate in addition with risk premium is multiplied by standard deviation of portfolio for using to calculate expected return rate on efficient portfolio.