Bài test tiếng Anh ngành ngân hàng và đáp án phần 7

Parrino, 2e Test Bank, Chapter 7

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
1. Whenever the outcome of an event has a number of different possibilities that have
equal probability of occurrence, then the expected value of the outcome is equal to the
simple average of the individual events.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Easy
2. The variance of a distribution can be a negative value.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Easy
3. The standard deviation of a distribution can be a negative value.
A) True

B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
4. The capital appreciation component of a stock's return considers the increase in price of
a stock divided by the beginning of period price of the stock.
A) True
B)

False
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Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
5. The capital appreciation component of a stock's return considers the increase in price of
a stock divided by the end of period price of the stock.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 6
Level of Difficulty: Medium
6. If the expected return of a bet, which is based on a coin toss, is $15, then that means
that the outcome of the bet will be a $15 cash inflow to the person making the bet.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Medium
7. The normal distribution is completely described by its mean and standard deviation
where 50 percent of the distribution's probability is less than the mean and 50 percent
greater than the mean.
A) True
B)

False

Ans: A

7-2

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Medium
8. The variance is denominated in squared units, whereas the standard deviation is
denominated in the same units as the expected value.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
9. If the price of an asset has not increased or decreased since the original purchase of the
asset, then the total return of the asset (if no dividends were paid during the period) is
equal to the capital appreciation component return.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
10. The income component of return for a common stock comes from the dividend cash
flow stream.

A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
11. If the capital appreciation return from owning a stock is positive, then the total return
from owning the same stock can be negative.
A) True
B)

False
7-3


Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
12. In order for the total return of a stock to be equal to –100 percent, the income return
component for that stock must be zero.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Easy
13. The best measure of risk within an investment is its variance.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
14. Robert paid $100 for a stock one year ago. The total return on the stock was 10 percent.
Therefore, the stock must be selling for $110 today.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
15. You have placed a wager such that you will either receive nothing if you lose the bet or

you will receive $10 if you win the bet. If the expected cash receipt of the wager is $9,
then there is a 100 percent probability that you will win the wager.
A) True
7-4


B)

False

Ans: B

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Medium
16. The variance is equal to the square root of the standard deviation.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Medium
17. If you are calculating the variance and standard deviation of returns for a stock, the
variance will always be larger than the standard deviation.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 6
Level of Difficulty: Easy
18. The appropriate measure of risk for a diversified portfolio is beta.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
19. The coefficient of variation divides the variance of the returns of an asset by the
expected return of that asset.
A) True
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B)

False

Ans: B

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
20. The coefficient of variation is a good measure of the amount of risk that an asset will
contribute to a diversified portfolio of assets.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
21. If you are building a portfolio, then you desire assets that have a correlation coefficient
of one.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
22. If the returns for two assets have a correlation coefficient of one, then there are no
benefits of diversification by combining these assets in a two-asset portfolio.

A) True
B)

False

Ans: A

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Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
23. Utilizing the fact that two or more asset values do not always move in the same
direction at the same time in order to reduce the risk of a portfolio is called
diversification.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
24. If you are trying to determine whether to purchase Security A or Security B as the only
holding in your portfolio, then you can consider the coefficient of variation in order to
understand the risk-return relationship of the individual securities.
A) True

B)

False

Ans: A

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
25. The coefficient of variation is useful when deciding which individual stocks to add to
your diversified portfolio.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
26. If two assets with return correlation coefficients less than one make up a portfolio, then
the portfolio does not take advantage of any diversification benefits.
A) True
B)

False
7-7

Ans: B

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
27. If the covariance between the returns of two assets is equal to zero, then the correlation
coefficient must also be zero.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
28. If the distribution of returns for an asset has a variance of zero, then covariance of
returns between that asset and the returns any other asset must equal zero.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
29. The expected return of the market portfolio is equal to the market risk premium.

A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
30. If you were to completely diversify your portfolio by purchasing a portion of every
asset in the investment universe, then the expected return of your portfolio is equal to
the risk-free rate.
A) True
7-8


B)

False

Ans: B

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
31. The market risk-premium is equal to expected return on the market portfolio.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 7
Level of Difficulty: Medium
32. If you know the risk-free rate, the market risk-premium, and the beta of a stock, then
using the CAPM you will be able to calculate the expected rate of return for the stock.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 6
Level of Difficulty: Medium
33. The market risk-premium is equal to the expected return on the market less the risk-free
rate of return.
A) True
B)

False

Ans: A

7-9

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
34. Given the historical information in the chapter, the beta of a small stock should be
greater than the beta of a corporate bond.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Easy
35. Complete diversification means that the portfolio is no longer subject to market risk.
A) True
B)

False

Ans: B

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
36. The expected return for a portfolio without borrowing
A) should never be less than the expected return of the asset with lowest expected
return.

B) should never be greater than the expected return of the asset with highest
expected return.
C) may not be an event with even a positive probability of occurrence.
D)

All of the above.

Ans: D

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
37. In a game of chance, the probability of winning a $50 prize is 40 percent, and the
probability of winning a $100 prize is 60 percent. What is the expected value of a prize
in the game?
A) $50
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B)

$75

C)

$80

D)

$100

Ans: C
Feedback:
$50(0.4) + $100 (0.6) = $80
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
38. In a game of chance, the probability of winning a $50 is 40 percent and the probability
of losing a $50 prize is 60 percent. What is the expected value of a prize in the game?
A) –$10
B)

$0

C)

$10

D)

$25

Ans: A
Feedback:
$50(0.4) – $50 (0.6) = -$10
Format: Multiple Choice
Learning Objective: LO 6
Level of Difficulty: Easy
39. Which of the following is the best measure of the systematic risk in a portfolio?
A) variance

B)

standard deviation

C)

covariance

D)

beta

Ans: D

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Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
40. Use the following table to calculate the expected return for the asset.
Return

Probability
0.25
0.5
0.25

A)

0.1
0.2
0.25
15.00%

B)

17.50%

C)

18.75%

D)

20.00%

Ans: C
Feedback:
(0.1)(0.25) + (0.2)(0.5) + (0.25)(0.25) = 0.1875
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
41. Use the following table to calculate the expected return for the asset.
Return

Probability
0.1
0.15
0.5

0.25

A)

0.05
0.1
0.15
0.25
12.50%

B)

13.75%

C)

15.75%

D)

16.75%

Ans: C
Feedback:
(0.5)(0.1) + (0.1)(0.15) + (0.15)(0.5) + (0.25)(0.25) = 0.1575

7-12


Format: Multiple Choice

Learning Objective: LO 4
Level of Difficulty: Easy
42. The expected return for the asset below is 18.75 percent. If the return distribution for
the asset is described as in the following table, what is the variance for the asset's
returns?
Return

A)

0.1
0.2
0.25
0.002969

B)

0.000613

C)

0.015195

D)

0.054486

Probability
0.25
0.5
0.25

Ans: A
Feedback:
(0.1)(0.25 – 0.1875)2 + (0.2)(0.5 – 0.1875) 2 + (0.25)(0.25 – 0.1875) 2 = 0.002969
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Easy
43. The expected return for the asset shown in the following table is 18.75 percent. If the
return distribution for the asset is described as below, what is the standard deviation for
the asset's returns?
Return Probability

A)

0.1
0.2
0.25
0.002969

B)

0.000613

C)

0.015195

D)

0.054486

0.25
0.5
0.25

Ans: D

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Feedback:
{ (0.25)(0.10 – 0.1875)2 + (0.5)(0.2 – 0.1875) 2 + (0.25)(0.25 – 0.1875) 2 }1/2 = 0.054486

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
44. If you are dealing with percentage returns, then which of the following is generally
true?
A) The variance of the return distribution is generally smaller than the standard
deviation.
B) The variance of the return distribution is generally larger than the standard
deviation.
C) The variance of the return distribution is measured in the same units as expected
return.
D) None of the above is generally true.
Ans: D

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Easy

45. The return distribution for an asset is as shown in the following table. What are the
missing values if the expected return is 10 percent?
Return

Probability

A)

0.1
x
x
0.20

0.25
0.5
0.25

B)

0.15

C)

0.10

D)

None of the above

Ans: C

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Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
46. The expected return for Stock Z is 30 percent. If we know the following information
about Stock Z, then what return will it produce in the Lukewarm state of the world?
Return

Probability

0.2
?
0.4

0.25
0.5
0.25

A)

Poor
Lukewarm
Dynamite!
20%

B)

30%

C)

40%

D)

It is impossible to determine.

Ans: B
Feedback:
(0.25)(0.2) + (0.5)(X) + (0.25)(0.4) = 0.3 , X = 0.3
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
47. The expected return for Stock V is 24.5 percent. If we know the following information
about Stock Z, then what is the probability of the Dynamite state of the world
occurring?

A)

Poor
Lukewarm
Dynamite!
5%

B)

10%

C)

15%

D)

20%

Return

Probability

0.15
0.28
0.19

0.2
0.7
?

Ans: B

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Feedback:
0.2 + 0.7 + X = 1.0 ===> X = 0.1 or 10%
Format: Multiple Choice
Learning Objective: LO 3

Level of Difficulty: Easy
48. Ahmet purchased a stock for $45 one year ago. The stock is now worth $65. During the
year, the stock paid a dividend of $2.50. What is the total return to Ahmet from owning
the stock? (Round your answer to the nearest whole percent.)
A) 5%
B)

44%

C)

35%

D)

50%

Ans: D
Feedback:
$65  $45  $2.50
 0.5  50%
$45
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
49. Julio purchased a stock one year ago for $27. The stock is now worth $32, and the total
return to Julio for owning the stock was 37 percent. What is the dollar amount of
dividends that he received for owning the stock during the year?
A) $4
B)

$5

C)

$6

D)

$7

Ans: B
Feedback:
$32  $27  $ X
 0.37, $ X  $5
$27

7-16


Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
50. Francis purchased a stock one year ago for $20, and it is now worth $24. The stock paid
a dividend of $3 during the year. What was the stock's rate of return from capital
appreciation during the year? (Round your answer to the nearest percent.)
A) 17%
B)

20%

C)

29%

D)

35%

Ans: B
Feedback:
$24  $20
 0.20
$20
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
51. Gwen purchased a stock one year ago for $25, and it is now worth $31. The stock paid
a dividend of $1.50 during the year. What was the stock's rate of return income during
the year? (Round your answer to the nearest percent.)
A) 6%
B)

15%

C)

24%

D)

26%

Ans: A
Feedback:
$1.50
 .06
$25

7-17


Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
52. Gunther earned a 62.5 percent return on a stock that he purchased one year ago. The
stock is now worth $12, and he received a dividend of $1 during the year. How much
did Gunther originally pay for the stock?
A) $7.00
B)

$7.50

C)

$8.00

D)

$8.50

Ans: C
Feedback:
$12  $ X  $1
 0.625, $ X  $8
$X
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
53. Moshe purchased a stock for $30 last year. He found out today that he had a –100
percent return on his investment. Which of the following must be true?
A) The stock is worth $30 today.
B)

The stock is worth $0 today

C)

The stock paid no dividends during the year.

D)

Both b and c must be true.

Ans: D

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
54. Babs purchased a piece of real estate last year for $85,000. The real estate is now worth

$102,000. If Babs needs to have a total return of 25 percent during the year, then what
is the dollar amount of income that she needed to have to reach her objective?
A) $3,750
B)

$4,250

C)

$4,750
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D)

$5,250

Ans: B
Feedback:
$102, 000  $85, 000  $ X
 0.25, $ X  $4, 250
$85, 000

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
55. Genaro needs to capture a return of 40 percent for his one-year investment in a
property. He believes that he can sell the property at the end of the year for $150,000
and that the property will provide him with rental income of $25,000. What is the
maximum amount that Genaro should be willing to pay for the property?

A) $112,500
B)

$125,000

C)

$137,500

D)

$150,000

Ans: B
Feedback:
$150, 000  $ X  $25, 000
 0.4, $ X  $125, 000
$X
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
56. Books Brothers stock was priced at $15 per share two years ago. The stock sold for $13
last year and now it sells for $18. What was the total return for owning Books Brothers
stock during the most recent year? Assume that no dividends were paid and round to the
nearest percent.
A) 17%
B)

20%

C)

23%

D)

38%

Ans: D

7-19


Feedback:
$18  $13
 0.3846
$13
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
57. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and
it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate
of return for owning Serox in the most recent year? (Round to the nearest percent.)
A) 12%
B)

16%

C)

32%

D)

40%

Ans: B
Feedback:
$28  $25  $1.1
 0.164
$25
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
58. You have observed that the average size of a particular goldfish is 1.5 inches long. The
standard deviation of the size of the goldfish is 0.25 inches. What is the size of a
goldfish such that 95 percent of the goldfish are smaller? Assume a normal distribution
for the size of goldfish.
A) 1.01 inches
B)

1.09 inches

C)

1.91 inches

D)

1.99 inches

Ans: C
Feedback:
1.5 + 1645 (0.25) = 1.91 inches

7-20


Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
59. You know that the average college student eats 0.75 pounds of food at lunch. If the
standard deviation of that eating is 0.2 pounds of food, then what is the total amount of
food that a cafeteria should have on hand to be 95percent confident that it will not run
out of food when feeding 50 college students.
A) 17.90 pounds
B)

21.05 pounds

C)

53.95 pounds

D)

57.10 pounds

Ans: C
Feedback:

50 students * {0.75 pounds per student + 1.645 (0.2 pounds per student)} = 53.95
pounds of food required.
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
60. If a random variable is drawn from a normal distribution, what is the probability that
the random variable is larger than 1.96 standard deviations larger than the mean?
A) 1.25%
B)

2.50%

C)

3.75%

D)

5.00%

Ans: B

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
61. If a random variable is drawn from a normal distribution, what is the probability that
the random variable is larger than 1.96 standard deviations below the mean?
A) 95.00%
B)

96.25%

C)

97.50%
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D)

98.75%

Ans: C

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
62. Niles is making an investment with an expected return of 12 percent. If the standard
deviation of the return is 4.5 percent, and if Niles is investing $100,000, then what
dollar amount is Niles 95 percent sure that he will have at the end of the year?
A) $100,000.00
B)

$104,597.50

C)

$116,500.00

D)

$119,402.50

Ans: B
Feedback:
{ 1 + [0.12 – 1.645 (0.045)]} X $100,000 = $104,597.50
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
63. Which of the following investment classes had the greatest average return based on
recent historical data?
A) Intermediate-Term Government Bonds
B)

Long-Term Government Bonds

C)

Large U.S. Stocks

D)

Small U.S. Stocks

Ans: D

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
64. Which of the following investment classes had the greatest variability in returns for

recent historical data?
A) Intermediate-Term Government Bonds
7-22


B)

Long-Term Government Bonds

C)

Large U.S. Stocks

D)

Small U.S. Stocks

Ans: D

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
65. If you were to compare the returns of an individual stock to a market index, select the
answer below that is most true.
A) The returns of the individual stock will show more variability than those of the
market index.
B) The returns of the individual stock will show less variability than those of the
market index.
C) The returns of the individual stock will show the same level of variability than
those of the market index, if they have the same beta.

D) None of the above.
Ans: A

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
66. Tommie has made an investment that will generate returns that are subject to the state
of the economy during the year. Use the following information to calculate the standard
deviation of the return distribution for Tommie's investment.
State
Weak
OK
Great
A) 0.0453
B)

0.0467

C)

0.0481

D)

0.0495

Return

Probability

0.13
0.2
0.25

0.3
0.4
0.3

Ans: B
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Feedback:
E ( R )  (0.3)(0.13)  (0.4)(0.2)  (0.3)(0.25)  0.194
Var ( R )  0.3(0.13  0.194)2  0.4(0.2  0.194)2  0.3(0.25  0.194) 2  0.002184
1

Std ( R )  (0.002184) 2  0.046733

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
67. Elrond has made an investment that will generate returns that are subject to the state of
the economy. Use the following information to calculate the variance of the return
distribution for Elrond's investment.
State
Weak
OK
Great
A) 0.0536

B)

0.0543

C)

0.0550

D)

0.0557

Return

Probability

0.10
0.17
0.28

0.8
0.1
0.1

Ans: D
Feedback:

7-24

Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Medium
68. Braniff Ground Services stock has an expected return of 9 percent and a variance of
0.25 percent. What is the coefficient of variation for Braniff?
A) 0.0278
B)

0.5556

C)

1.800

D)

36.00

Ans: B
Feedback:

Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Medium
69. Sayers purchased a stock with a coefficient of variation equal to 0.125. The expected
return on the stock is 20 percent. What is the variance of the stock?
A) 0.000625
B)

0.025000

C)

0.625000

D)

0.790500

Ans: A
Feedback:
Coefficient

of

Variation 


E (R)

1
2 2

 


0.20

7-25

 0.125,  2  0.000625