Which asset below is generally the most suitable benchmark measure of the risk-free return? Treasury bills Small stocks Long-term government bonds Non-investment grade bonds Common stocks
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- What are the differences between stocks and bonds in terms of predicted future payments? Which sort of investment is regarded to be riskier (stocks or bonds)? Given your knowledge, which investment (stocks or bonds) do you believe is often referred to as "fixed income"?Which asset class has the highest average historical returns and also the highest risk as measured by standard deviation? US treasury bills Large company stocks Small company stocks Long-term corporate bonds Long-term government bondsWhat does the capital asset pricing model (CAPM) calculate? a. The expected rate of return on an individual stock with respect to the risk-free rate of return b. The expected rate of return of an individual stock based on its overall risk c. The expected rate of return of an individual stock with respect to its market risk only d. The expected rate of return of an individual stock reflecting its financial risk Clear my choice
- In a CAPM world, what do you need to know in order to estimate an asset's expected return? Group of answer choices The risk free rate, the market risk premium, and the asset's standard deviation The risk free rate, the market risk premium, and the asset's beta The corporate bond rate, the expected return on the S&P 500 and the asset's Beta Market sentiment, historical stock returns and the risk free rateFor the cost of equity (stock) is it better to use the current US Treasury bill rate or a longer-termgovernment bond rate as the risk-free rate of return?Differentiate between the terms expected rate of return, required rate of return, and historical rate of return as they are applied to common stocks
- Duration is important in understanding a fixed income portfolio because A. it is used in the capital asset pricing model B. it measures the interest rate sensitivity of a bonds value C. It measures the correlation with a bank's stock price D. It causes contagionWhich of the following portfolios have the least risk? why? A portfolio of long-term Government bonds Standard and Poor's composite index Portfolio of common stocks of small firms A portfolio of treasury billsThe measure of risk is called: Group of answer choices The rate provided by short term government securities Beta The market rate of return The rate provided by long term government securities
- How do stocks and bonds differ in terms of the future payments that they are expected to make? Which type of investment (stocks or bonds) is considered to be more risky? Given what you know, which investment (stocks or bonds) do you think commonly goes by the nickname “fixed income”?An efficient capital market is best defined as a market in which security prices reflect which one of the following? Multiple Choice A Current inflation B A risk premium C All available information D The historical arithmetic rate of return E The historical geometric rate of returnOut of the following options below, which one has the lowest level of risk, and which one has the highest level of risk? Treasury billsCertificates of DepositCommercial paperTreasury notes and bondsMunicipal bondsCorporate bondsMortgage-and asset-backed securities Common stocksPreferred stocks