Multiple Choice Answers

If in the opinion of a given investor a stock’s expected return exceeds its required return, this suggests that the investor thinks
Answer
a. the stock is experiencing supernormal growth.
b. the stock should be sold.
c. the stock is a good buy.
d. management is probably not trying to maximize the price per share.
e. dividends are not likely to be declared.
An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options?
Answer
a. In-the-money
b. Put
c. Naked
d. Covered
e. Out-of-the-money

 

A more recent issue that is causing major problems in the business community is
Answer
a. the privatization of ownership.
b. short-term versus long-term financial goals of management.
c. ethical problems
d. environmental concerns.
Which is the best measure of risk for a single asset held in isolation, and which is the best measure for an asset held in a diversified portfolio?
Answer
a. Variance; correlation coefficient.
b. Standard deviation; correlation coefficient.
c. Beta; variance.
d. Coefficient of variation; beta.
e. Beta; bet