-Which of the following would be required to value a zero-coupon bond? Face Valu
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Question
-Which of the following would be required to value a zero-coupon bond?
Face Value of Bond
Rate of return per investment period
Number of investment periods
All of the above
-The risk or possibility that a bondholder may not receive the cash flows expected, whether it is interest payments or face amount at maturity, is referred to as ______ risk.
Bankruptcy risk
Default risk
Interest rate risk
Inflation risk
-Value & Price: Which of the following is NOT true?
When a security is priced below the value of its cash flows an investor should buy.
When a security is priced above the value of its cash flows an investor should sell.
Bonds and stocks are each a form of security in the cash flows of a corporation or issuer.
All stocks have the same cost of equity.
-Risk can be diversifiable or non-diversifiable. Which of the following is NOT true (this will be something I told you in class – not in the book)?
50% of a stock's return, over time, is generally market related.
30% would be sector or industry specific.
20% would be the individual company.
Intergalactic Widget, Incorporated, has a new Gazmotron 8500 AI Robot that is expected to replace all accountants in the year 2346. Sales would be $50 bazillion in that year. Even so, there is no reason to invest in any other stocks because the return on the stock for the next 300+ years will be about 50% per annum.
-You are building an individual investment portfolio to hold securities for long-term appreciation but also want to limit your portfolio's volatility relative to the overall market. Assuming each new security added is in a different economic sector, the variance of the portfolio approaches market variance at about ____ securities.
3
7
20
500
Face Value of Bond
Rate of return per investment period
Number of investment periods
All of the above
Explanation / Answer
1) all of the above
2) default risk
3) all stocks have same cost of equity
4) can not be answered as it is mentioned that it has been discussed in the class
5) 500
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