FINA 5320 - EXAM 3 THEORETICAL ACTUAL 2025/2026

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FINA 5320 - EXAM 3 THEORETICAL ACTUAL 2025/2026 QUESTIONS AND 100% CORRECT ANSWERS The excess return is computed by ____ the average return for the investment a. subtracting the inflation rate from b. adding the inflation rate to c. subtracting the average return on the US treasury bill from d. adding the average return on the us treasury bill to e. subtracting the average return on long-term government bonds from - Answer -c. subtracting the average return on the US treasury bill from The variance of returns is computed by dividing the sum of the a. squared deviations by the number of returns minus one b. average returns by the number of returns minus one c. average returns by the number of returns plus one d. squared deviations by the average rate of return e. squared deviations by the number of returns plus one - Answer -a. squared deviations by the number of returns minus one In estimating the future equity risk premium, it is important to include assumptions about the a. historical distribution of returns on derivative securities only b. future risk environment only c. amount of risk aversion of future investors only d. historical distribution of returns on derivative securities and the future risk environment e. future risk environment and the amount of risk aversion of future investors - Answer -e. future risk environment and the amount of risk aversion of future investors Which one of these is a measure of the interrelationship between two Need assistance on Online classes, Exams & Assignments? Reach out for instant help!! Full Course Assistance, Plagiarism-free Essay Writing, Research Paper, Dissertation, Discussion Posts, etc…. Confidential & Secure services. Tutors are available for all subjects! Email now at: tutorjean01@gmail.com securities? a. covariance b. duration c. standard deviation d. alpha e. variance - Answer -a. covariance Which one of the following statements is correct concerning the expected rate of return on an individual stock given various states of the economy? a. the expected return is a geometric average where the probabilities of the economic states are used as the exponential powers b. the expected return is an arithmetic average of the individual returns for each state of the economy c. the expected return is a weighted average where the probabilities of the economic states are used as the weights d. the expected return is equal to the summation of the values computed by dividing the expected return for each economic state by the probability of the state e. as long as the total probabilities of the economic states equal 100%, then the expected return on the stock is a geometric average of the expected returns for each economic state - Answer -c. the expected return is a weighted average where the probabilities of the economic states are used as the weights You have plotted the monthly returns for 2 securities for the past 5 years on the same graph. The pattern of the movements of each of the 2 securities generally rose and fell to the same degree in step with each other. This indicates the securities have: a. no correlation with each other b. a weak negative correlation c. a strong negative correlation d. a strong positive correlation e. a weak positive correlation - Answer -d. a strong positive correlation The range of possible correlations between 2 securities is defined as a. 0 to +1 b. 0 to -1 c. >=0 Need assistance on Online classes, Exams & Assignments? Reach out for instant help!! Full Course Assistance, Plagiarism-free Essay Writing, Research Paper, Dissertation, Discussion Posts, etc…. Confidential & Secure services. Tutors are available for all subjects! Email now at: tutorjean01@gmail.com