Reference no: EM13895231

1-Currency risk is a major problem for the long-term investor in a well -diversified international mutual fund.

2-An efficient company in a high risk industry may be less risky than an inefficient company in a low risk industry.

3-The mean and standard deviation is all the information that is needed to describe most stock probability distributions.

4-If two securities with the same standard deviation are perfectly negatively correlated, splitting an investment equally between the two securities completely eliminates all variability.

5- The longer the time thatinvestors postpone their consumption, the greater the chance that something adverse will occur to lessen the value of their investment.

6-For positive interest rates with more than one cash flow, an annuity due is always worth more than an ordinary annuity.

7- A project that is not acceptable under the net present value (NPV) criteria may be acceptable under the internal rate of return (IRR) criteria, so both analyses are needed.

8-The pay-back period analyzes an investment by dividing the annual cash flow by the amount of the cash investment in order to determine the cash return.

9-Convexity measures the change in a bond's price to small changes in interest rates.

10-A price increase when interest rates decrease is equal to the price decrease when interest rates increase.

11-The intrinsic value of a stock can be estimated by calculating the present value of the future cash flows expected to be received.

12-The P/E valuation model and dividend discount model should theoretically provide the same stock value.

13-The Markowitz Portfolio Theory states that given the choice between multiple assets with equal expected returns, investors prefer the asset with the greatest risk

14-The Black-Scholes model assumes two outcomes and discrete time periods

15- The lower the correlation between two assets, the greater the potential for reducing the risk of a portfolio containing the two assets.

16- After individual securities or mutual funds have been selected, the asset allocation decision must be made.

17-The risk-return characteristics of the portfolio are more important than the risk-return characteristic of an individual asset

18-Dividend Reinvestment Plans (DRIPs) allow shareholders to take dividends in the form of cash.
19- Negative leverage occurs if the investment does not generate sufficient cash flow to pay off the debt.

20- Investors should consider using financial leverage if they want short-term appreciation rather than a long-term return.

21- A portfolio that offers the lowest risk for a given level of return is known as an efficient portfolio.

22- Studies have shown that investing in different industries as well as different countries reduces portfolio risk.

23- The index used to represent market returns is always assigned a beta of 1.0.

24 - The higher a bond's Moody's or Standard & Poor's rating, the higher its yield.

25- A down-sloping yield curve indicates that interest rates are about to rise.

26 - Like ordinary stocks, exchange traded funds (ETFs) can be sold short and most exchange-traded funds are index funds.

27- Puts and calls are issued by the same corporation that issued the underlying stock.

28- Unlike stocks and bonds, futures contracts trade only at specific times during normal working hours.

29- Utility can be measured by the risk-return trade-off reflected in the Capital Asset Pricing Model (CAPM).

30- A good benchmark reflects both the client's needs and the manager's style.