Financial Management - Study Mode
[#911] If book value is greater than market value comparison with investors for future stock are considered as
Correct Answer
(A) pessimistic
Explanation
Solution: If book value is greater than market value comparison with investors for future stock are considered as pessimistic. Book value is also the net asset value of a company calculated as total assets minus intangible assets (patents, goodwill) and liabilities. For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges and so on.
[#912] An average return of portfolio divided by its coefficient of beta is classified as
Correct Answer
(B) treynor's reward to volatility ratio
Explanation
Solution: An average return of portfolio divided by its coefficient of beta is classified as treynor's reward to volatility ratio. The Treynor ratio, also known as the reward-to-volatility ratio, is a performance metric for determining how much excess return was generated for each unit of risk taken on by a portfolio.
[#913] Slope coefficient of beta is classified statistically significant if its probability is
Correct Answer
(C) less than 5%
Explanation
Solution: Slope coefficient of beta is classified statistically significant if its probability is less than 5%. A standardized beta coefficient compares the strength of the effect of each individual independent variable to the dependent variable.
[#914] Second factor in Fama French three factor model is the
Correct Answer
(C) size of company
Explanation
Solution: Second factor in Fama French three factor model is the size of company. The Fama and French model has three factors: size of firms, book-to-market values and excess return on the market. In other words, the three factors used are SMB (small minus big), HML (high minus low) and the portfolio's return less the risk free rate of return.
[#915] Difference between actual return on stock and predicted return is considered as
Correct Answer
(D) random error
Explanation
Solution: Difference between actual return on stock and predicted return is considered as random error. Random error causes one measurement to differ slightly from the next. It comes from unpredictable changes during an experiment.