Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:The nominal risk-free rate of interest is a function of the
Select one:
A.
real risk-free rate and the investment's variance.
B.
real risk-free rate and the rate of inflation.
C.
tax-free rate plus the rate of inflation.
D.
T-note rate plus the inflation rate.
Which of the following statements is true?
Select one:
A.
The only way to maintain purchasing power over time is to invest in bonds.
B.
An asset allocation decision for a taxable portfolio that does not include a substantial
commitment to ordinary shares may make it difficult for the portfolio to maintain
real value over time.
C.
Except for tax-exempt investors and tax-deferred accounts, annual tax payments
increase investment returns.
O
D.
After adjusting for taxes, long-term bonds consistently outperform shares.
Transcribed Image Text:Return on risk-free asset = 4.5%
Expected return for asset i = 12.75%
Expected return on the market portfolio = 9.25%
Calculate the risk premium for asset i.
A.
3.50%
B.
8.25%
C.
4.50%
D.
4.75%
The annual rates of return of Share Z for the last four years are 0.10, 0.15, -0.05, and 0.20.
Compute the arithmetic mean annual rate of return for Share Z.
Select one:
A.
0.04
B.
0.06
C.
0.03
O
D.
0.10
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- What-if forecasting provides information regarding how much net interest income changes when interest rates are assumed to increase/decrease by various amounts. Select one: True Falsearrow_forwardWith regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to pricearrow_forwardWhat is the term for the type of interest rates that constitute the yield curve? What do these interest rates represent?arrow_forward
- By which symbol is the break-even interest rate denoted?arrow_forwardWhich of the following is true about Interest Rate? i. The Fisher Effect illustrates the positive relationship between inflation and nominal interest rates. ii. APR will always be greater than the EAR. iii. We can find the nominal interest rate by adding the default and maturity premiums to the sum of the real rate and inflation. O A. ii and i only O B. i and ii only OC. i only O D. i, ii, and iiiarrow_forwardThe slope of the Security Market Line equals to ____, and the slope of Capital Allocation Line equals to____. Select one: A. Beta; Sharpe Ratio B. Market Risk Premium; Sharpe Ratio C. Risk free rate; Volatility D. Market Risk Premium; Volatilityarrow_forward
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