Multipe choice

Multiple Choice Chapter 1

1(4). The risk premium is defined as the rate of return on
A. A risky asset minus the inflation rate
B. The overall market
C. A Treasury bill
D. A risky asset minus the risk-free rate
E. A risk-less investment
Answer: D

2(5). The variance measure the: Non-graded
A. Total difference between the actual returns and the average returns
B. Average difference between the actual squared returns and the risk-free returns
C. Average squared difference between the actual returns and the risk-free returns
D. Total difference between the average returns and the risk-free returns
E. Average squared difference between the actual and the average returns
Answer: E

3(7) The risk-free rate that is paid as compensation for waiting is referred to as the:
A. Time value of money
B. Real rate of return
C. Total dollar return
D. Average real return
E. Financial reward
Answer: A

4(12). The fact that higher returns are associated with higher standard deviation is known as the:
A. Real return factor
B. Geometric relationship
C. Risk-return tradeoff
D. Market variance
E. Market capitalization
Answer: C

5(17). The frequency distribution that is completely defined by its average and standard deviation is referred to as a(n):
A. Normal distribution
B. Variance distribution
C. Expected rate of return
D. Average geometric return
E. Average arithmetic return
Answer: A

6(31). In the normal distribution, about 95 percent of the observations are between plus or minus ____ standard deviations from the mean.
A. 0
B. 1
C. 2
D. 3
E. 4
Answer: C
7(33). The mean and standard deviation of the standard normal distribution are ___ and ____.
A. 0; 0 PPT
B. 1; 0
C. 0; 1
D. 1; 1
E. None of the above.
Answer: C

8(40). Over the period 1983-2007, the S&P/TSX 60 index had an average return of about
A. 22.43%
B. 2.88%
C. 29.92%
D. 12.09%
E. 13.20%
Answer: D