投资学第7版testbank答案05.docx

1、投资学第7版testbank答案05Multiple Choice Questions 1. Over the past year you earned a nominal rate of interest of 10 percent on your money. The inflation rate was 5 percent over the same period. The exact actual growth rate of your purchasing power was A) %. B) %. C) %. D) %. E) % Answer: D Difficulty: Mod

2、erate Rationale: r = (1+R) / (1+I) - 1; % / % - 1 = %. 2. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 7%. What is your approximate annual real rate of return if the rate of inflation was 3% over the year A) 4%. B) 10%. C) 7%. D) 3%. E) none of the above.

3、 Answer: A Difficulty: Easy Rationale: 7% - 3% = 4%. 3. If the annual real rate of interest is 5% and the expected inflation rate is 4%, the nominal rate of interest would be approximately A) 1%. B) 9%. C) 20%. D) 15%. E) none of the above. Answer: B Difficulty: Easy Rationale: 5% + 4% = 9%. 4. You

4、purchased a share of stock for $20. One year later you received $1 as dividend and sold the share for $29. What was your holding period return A) 45% B) 50% C) 5% D) 40% E) none of the above Answer: B Difficulty: Moderate Rationale: ($1 + $29 - $20)/$20 = , or 50%. 5. Which of the following determin

5、e(s) the level of real interest rates I)the supply of savings by households and business firmsII)the demand for investment fundsIII)the governments net supply and/or demand for funds A) I only B) II only C) I and II only D) I, II, and III E) none of the above Answer: D Difficulty: Moderate Rationale

6、: The value of savings by households is the major supply of funds; the demand for investment funds is a portion of the total demand for funds; the governments position can be one of either net supplier, or net demander of funds. The above factors constitute the total supply and demand for funds, whi

7、ch determine real interest rates. 6. Which of the following statement(s) is (are) true I)The real rate of interest is determined by the supply and demand for funds.II)The real rate of interest is determined by the expected rate of inflation.III)The real rate of interest can be affected by actions of

8、 the Fed.IV)The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation. A) I and II only. B) I and III only. C) III and IV only. D) II and III only. E) I, II, III, and IV only Answer: B Difficulty: Moderate Rationale: The expected rate of inflation is a deter

9、minant of nominal, not real, interest rates. Real rates are determined by the supply and demand for funds, which can be affected by the Fed. 7. Which of the following statements is true A) Inflation has no effect on the nominal rate of interest. B) The realized nominal rate of interest is always gre

10、ater than the real rate of interest. C) Certificates of deposit offer a guaranteed real rate of interest. D) None of the above is true. E) A, B and C Answer: D Difficulty: Moderate Rationale: Expected inflation rates are a determinant of nominal interest rates. The realized nominal rate of interest

11、would be negative if the difference between actual and anticipated inflation rates exceeded the real rate. The realized nominal rate of interest would be less than the real rate if the unexpected inflation were greater than the real rate of interest. Certificates of deposit contain a real rate based

12、 on an estimate of inflation that is not guaranteed. 8. Other things equal, an increase in the government budget deficit A) drives the interest rate down. B) drives the interest rate up. C) might not have any effect on interest rates. D) increases business prospects. E) none of the above. Answer: B

13、Difficulty: Moderate Rationale: An increase in the government budget deficit, other things equal, causes the government to increase its borrowing, which increases the demand for funds and drives interest rates up. 9. Ceteris paribus, a decrease in the demand for loanable funds A) drives the interest

14、 rate down. B) drives the interest rate up. C) might not have any effect on interest rate. D) results from an increase in business prospects and a decrease in the level of savings. E) none of the above. Answer: A Difficulty: Moderate Rationale: A decrease in demand, ceteris paribus, always drives in

15、terest rates down. An increase in business prospects would increase the demand for funds. The savings level affects the supply of, not the demand for, funds. 10. The holding period return (HPR) on a share of stock is equal to A) the capital gain yield during the period, plus the inflation rate. B) t

16、he capital gain yield during the period, plus the dividend yield. C) the current yield, plus the dividend yield. D) the dividend yield, plus the risk premium. E) the change in stock price. Answer: B Difficulty: Moderate Rationale: The HPR of any investment is the sum of the capital gain and the cash

17、 flow over the period, which for common stock is B. 11. Historical records regarding return on stocks, Treasury bonds, and Treasury bills between 1926 and 2005 show that A) stocks offered investors greater rates of return than bonds and bills. B) stock returns were less volatile than those of bonds

18、and bills. C) bonds offered investors greater rates of return than stocks and bills. D) bills outperformed stocks and bonds. E) treasury bills always offered a rate of return greater than inflation. Answer: A Difficulty: Moderate Rationale: The historical data show that, as expected, stocks offer a

19、greater return and greater volatility than the other investment alternatives. Inflation sometimes exceeded the T-bill return. 12. If the interest rate paid by borrowers and the interest rate received by savers accurately reflects the realized rate of inflation: A) borrowers gain and savers lose. B)

20、savers gain and borrowers lose. C) both borrowers and savers lose. D) neither borrowers nor savers gain or lose. E) both borrowers and savers gain. Answer: D Difficulty: Moderate Rationale: If the described interest rate accurately reflects the rate of inflation, both borrowers and lenders are payin

21、g and receiving, respectively, the real rate of interest; thus, neither group gains.Use the following to answer questions 13-15:You have been given this probability distribution for the holding period return for KMP stock: 13. What is the expected holding period return for KMP stock A) % B) % C) % D

22、) % E) % Answer: A Difficulty: Moderate Rationale: HPR = .30 (18%) + .50 (12%) + .20 (-5%) = % 14. What is the expected standard deviation for KMP stock A) % B) % C) % D) % E) % Answer: B Difficulty: Difficult Rationale: s = .30 (18 - 2 + .50 (12 - 2 + .20 (-5 - 21/2 = % 15. What is the expected var

23、iance for KMP stock A) % B) % C) % D) % E) % Answer: A Difficulty: Difficult Rationale: s = .30 (18 - 2 + .50 (12 - 2 + .20 (-5 - 2 = % 16. If the nominal return is constant, the after-tax real rate of return A) declines as the inflation rate increases. B) increases as the inflation rate increases.

24、C) declines as the inflation rate declines. D) increases as the inflation rate decreases. E) A and D. Answer: E Difficulty: Moderate Rationale: Inflation rates have an inverse effect on after-tax real rates of return. 17. The risk premium for common stocks A) cannot be zero, for investors would be u

25、nwilling to invest in common stocks. B) must always be positive, in theory. C) is negative, as common stocks are risky. D) A and B. E) A and C. Answer: D Difficulty: Moderate Rationale: If the risk premium for common stocks were zero or negative, investors would be unwilling to accept the lower retu

26、rns for the increased risk. 18. A risk-free intermediate or long-term investment A) is free of all types of risk. B) does not guarantee the future purchasing power of its cash flows. C) does guarantee the future purchasing power of its cash flows as it is insured by the U. S. Treasury. D) A and B. E

27、) B and C. Answer: B Difficulty: Moderate Rationale: A risk-free U. S. Treasury bond is a fixed income instrument, and thus does not guarantee the future purchasing power of its cash flows. As a result, purchasing power risk is present. 19. You purchase a share of Boeing stock for $90. One year late

28、r, after receiving a dividend of $3, you sell the stock for $92. What was your holding period return A) % B) % C) % D) % E) none of the above Answer: D Difficulty: Moderate Rationale: HPR = (92 - 90 + 3) / 90 = % 20. Toyota stock has the following probability distribution of expected prices one year

29、 from now: If you buy Toyota today for $55 and it will pay a dividend during the year of $4 per share, what is your expected holding period return on Toyota A) % B) % C) % D) % E) None of the above Answer: D Difficulty: Difficult Rationale: E(P1) = .25 (54/55 - 1) + .40 (64/55 - 1) + .35 (74/55 - 1)

30、 = %. 21. Which of the following factors would not be expected to affect the nominal interest rate A) the supply of loanable funds B) the demand for loanable funds C) the coupon rate on previously issued government bonds D) the expected rate of inflation E) government spending and borrowing Answer:

31、C Difficulty: Easy Rationale: The nominal interest rate is affected by supply, demand, government actions and inflation. Coupon rates on previously issued government bonds reflect historical interest rates but should not affect the current level of interest rates. 22. Your Certificate of Deposit will mature in one week and you are considering how to invest the proceeds. If you invest in a 30-day CD the bank will pay you 4%. If