投资学第7版testbank答案05.docx

投资学第7版testbank答案05.docx

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投资学第7版testbank答案05

MultipleChoiceQuestions

1.Overthepastyearyouearnedanominalrateofinterestof10percentonyourmoney.Theinflationratewas5percentoverthesameperiod.Theexactactualgrowthrateofyourpurchasingpowerwas

A）%.

B）%.

C）%.

D）%.

E）%

Answer:

DDifficulty:

Moderate

Rationale:

r=（1+R）/（1+I）-1;%/%-1=%.

2.Ayearago,youinvested$1,000inasavingsaccountthatpaysanannualinterestrateof7%.Whatisyourapproximateannualrealrateofreturniftherateofinflationwas3%overtheyear

A）4%.

B）10%.

C）7%.

D）3%.

E）noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

7%-3%=4%.

3.Iftheannualrealrateofinterestis5%andtheexpectedinflationrateis4%,thenominalrateofinterestwouldbeapproximately

A）1%.

B）9%.

C）20%.

D）15%.

E）noneoftheabove.

Answer:

BDifficulty:

Easy

Rationale:

5%+4%=9%.

4.Youpurchasedashareofstockfor$20.Oneyearlateryoureceived$1asdividendandsoldthesharefor$29.Whatwasyourholdingperiodreturn

A）45%

B）50%

C）5%

D）40%

E）noneoftheabove

Answer:

BDifficulty:

Moderate

Rationale:

（$1+$29-$20）/$20=,or50%.

5.Whichofthefollowingdetermine（s）thelevelofrealinterestrates

I）thesupplyofsavingsbyhouseholdsandbusinessfirms

II）thedemandforinvestmentfunds

III）thegovernment'snetsupplyand/ordemandforfunds

A）Ionly

B）IIonly

C）IandIIonly

D）I,II,andIII

E）noneoftheabove

Answer:

DDifficulty:

Moderate

Rationale:

Thevalueofsavingsbyhouseholdsisthemajorsupplyoffunds;thedemandforinvestmentfundsisaportionofthetotaldemandforfunds;thegovernment'spositioncanbeoneofeithernetsupplier,ornetdemanderoffunds.Theabovefactorsconstitutethetotalsupplyanddemandforfunds,whichdeterminerealinterestrates.

6.Whichofthefollowingstatement（s）is（are）true

I）Therealrateofinterestisdeterminedbythesupplyanddemandforfunds.

II）Therealrateofinterestisdeterminedbytheexpectedrateofinflation.

III）TherealrateofinterestcanbeaffectedbyactionsoftheFed.

IV）Therealrateofinterestisequaltothenominalinterestrateplustheexpectedrateofinflation.

A）IandIIonly.

B）IandIIIonly.

C）IIIandIVonly.

D）IIandIIIonly.

E）I,II,III,andIVonly

Answer:

BDifficulty:

Moderate

Rationale:

Theexpectedrateofinflationisadeterminantofnominal,notreal,interestrates.Realratesaredeterminedbythesupplyanddemandforfunds,whichcanbeaffectedbytheFed.

7.Whichofthefollowingstatementsistrue

A）Inflationhasnoeffectonthenominalrateofinterest.

B）Therealizednominalrateofinterestisalwaysgreaterthantherealrateofinterest.

C）Certificatesofdepositofferaguaranteedrealrateofinterest.

D）Noneoftheaboveistrue.

E）A,BandC

Answer:

DDifficulty:

Moderate

Rationale:

Expectedinflationratesareadeterminantofnominalinterestrates.Therealizednominalrateofinterestwouldbenegativeifthedifferencebetweenactualandanticipatedinflationratesexceededtherealrate.Therealizednominalrateofinterestwouldbelessthantherealrateiftheunexpectedinflationweregreaterthantherealrateofinterest.Certificatesofdepositcontainarealratebasedonanestimateofinflationthatisnotguaranteed.

8.Otherthingsequal,anincreaseinthegovernmentbudgetdeficit

A）drivestheinterestratedown.

B）drivestheinterestrateup.

C）mightnothaveanyeffectoninterestrates.

D）increasesbusinessprospects.

E）noneoftheabove.

Answer:

BDifficulty:

Moderate

Rationale:

Anincreaseinthegovernmentbudgetdeficit,otherthingsequal,causesthegovernmenttoincreaseitsborrowing,whichincreasesthedemandforfundsanddrivesinterestratesup.

9.Ceterisparibus,adecreaseinthedemandforloanablefunds

A）drivestheinterestratedown.

B）drivestheinterestrateup.

C）mightnothaveanyeffectoninterestrate.

D）resultsfromanincreaseinbusinessprospectsandadecreaseinthelevelofsavings.

E）noneoftheabove.

Answer:

ADifficulty:

Moderate

Rationale:

Adecreaseindemand,ceterisparibus,alwaysdrivesinterestratesdown.Anincreaseinbusinessprospectswouldincreasethedemandforfunds.Thesavingslevelaffectsthesupplyof,notthedemandfor,funds.

10.Theholdingperiodreturn（HPR）onashareofstockisequalto

A）thecapitalgainyieldduringtheperiod,plustheinflationrate.

B）thecapitalgainyieldduringtheperiod,plusthedividendyield.

C）thecurrentyield,plusthedividendyield.

D）thedividendyield,plustheriskpremium.

E）thechangeinstockprice.

Answer:

BDifficulty:

Moderate

Rationale:

TheHPRofanyinvestmentisthesumofthecapitalgainandthecashflowovertheperiod,whichforcommonstockisB.

11.Historicalrecordsregardingreturnonstocks,Treasurybonds,andTreasurybillsbetween1926and2005showthat

A）stocksofferedinvestorsgreaterratesofreturnthanbondsandbills.

B）stockreturnswerelessvolatilethanthoseofbondsandbills.

C）bondsofferedinvestorsgreaterratesofreturnthanstocksandbills.

D）billsoutperformedstocksandbonds.

E）treasurybillsalwaysofferedarateofreturngreaterthaninflation.

Answer:

ADifficulty:

Moderate

Rationale:

Thehistoricaldatashowthat,asexpected,stocksofferagreaterreturnandgreatervolatilitythantheotherinvestmentalternatives.InflationsometimesexceededtheT-billreturn.

12.Iftheinterestratepaidbyborrowersandtheinterestratereceivedbysaversaccuratelyreflectstherealizedrateofinflation:

A）borrowersgainandsaverslose.

B）saversgainandborrowerslose.

C）bothborrowersandsaverslose.

D）neitherborrowersnorsaversgainorlose.

E）bothborrowersandsaversgain.

Answer:

DDifficulty:

Moderate

Rationale:

Ifthedescribedinterestrateaccuratelyreflectstherateofinflation,bothborrowersandlendersarepayingandreceiving,respectively,therealrateofinterest;thus,neithergroupgains.

Usethefollowingtoanswerquestions13-15:

YouhavebeengiventhisprobabilitydistributionfortheholdingperiodreturnforKMPstock:

13.WhatistheexpectedholdingperiodreturnforKMPstock

A）%

B）%

C）%

D）%

E）%

Answer:

ADifficulty:

Moderate

Rationale:

HPR=.30（18%）+.50（12%）+.20（-5%）=%

14.WhatistheexpectedstandarddeviationforKMPstock

A）%

B）%

C）%

D）%

E）%

Answer:

BDifficulty:

Difficult

Rationale:

s=[.30（18-2+.50（12-2+.20（-5-2]1/2=%

15.WhatistheexpectedvarianceforKMPstock

A）%

B）%

C）%

D）%

E）%

Answer:

ADifficulty:

Difficult

Rationale:

s=[.30（18-2+.50（12-2+.20（-5-2]=%

16.Ifthenominalreturnisconstant,theafter-taxrealrateofreturn

A）declinesastheinflationrateincreases.

B）increasesastheinflationrateincreases.

C）declinesastheinflationratedeclines.

D）increasesastheinflationratedecreases.

E）AandD.

Answer:

EDifficulty:

Moderate

Rationale:

Inflationrateshaveaninverseeffectonafter-taxrealratesofreturn.

17.Theriskpremiumforcommonstocks

A）cannotbezero,forinvestorswouldbeunwillingtoinvestincommonstocks.

B）mustalwaysbepositive,intheory.

C）isnegative,ascommonstocksarerisky.

D）AandB.

E）AandC.

Answer:

DDifficulty:

Moderate

Rationale:

Iftheriskpremiumforcommonstockswerezeroornegative,investorswouldbeunwillingtoacceptthelowerreturnsfortheincreasedrisk.

18.Arisk-freeintermediateorlong-terminvestment

A）isfreeofalltypesofrisk.

B）doesnotguaranteethefuturepurchasingpowerofitscashflows.

C）doesguaranteethefuturepurchasingpowerofitscashflowsasitisinsuredbytheU.S.Treasury.

D）AandB.

E）BandC.

Answer:

BDifficulty:

Moderate

Rationale:

Arisk-freeU.S.Treasurybondisafixedincomeinstrument,andthusdoesnotguaranteethefuturepurchasingpowerofitscashflows.Asaresult,purchasingpowerriskispresent.

19.YoupurchaseashareofBoeingstockfor$90.Oneyearlater,afterreceivingadividendof$3,yousellthestockfor$92.Whatwasyourholdingperiodreturn

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

DDifficulty:

Moderate

Rationale:

HPR=（92-90+3）/90=%

20.Toyotastockhasthefollowingprobabilitydistributionofexpectedpricesoneyearfromnow:

IfyoubuyToyotatodayfor$55anditwillpayadividendduringtheyearof$4pershare,whatisyourexpectedholdingperiodreturnonToyota

A）%

B）%

C）%

D）%

E）Noneoftheabove

Answer:

DDifficulty:

Difficult

Rationale:

E（P1）=.25（54/55-1）+.40（64/55-1）+.35（74/55-1）=%.

21.Whichofthefollowingfactorswouldnotbeexpectedtoaffectthenominalinterestrate

A）thesupplyofloanablefunds

B）thedemandforloanablefunds

C）thecouponrateonpreviouslyissuedgovernmentbonds

D）theexpectedrateofinflation

E）governmentspendingandborrowing

Answer:

CDifficulty:

Easy

Rationale:

Thenominalinterestrateisaffectedbysupply,demand,governmentactionsandinflation.Couponratesonpreviouslyissuedgovernmentbondsreflecthistoricalinterestratesbutshouldnotaffectthecurrentlevelofinterestrates.

22.YourCertificateofDepositwillmatureinoneweekandyouareconsideringhowtoinvesttheproceeds.Ifyouinvestina30-dayCDthebankwillpayyou4%.If