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Practice Questions From Chapters 10-12 (With A Few "Bonus Questions From Chapter 13)

The document contains 6 practice questions from chapters 10-12 of a textbook on finance. The questions test understanding of key concepts like the risk premium, efficient market hypotheses in weak, semi-strong and strong forms, and historical average returns of different asset classes.

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Christine Altamarino
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58 views1 page

Practice Questions From Chapters 10-12 (With A Few "Bonus Questions From Chapter 13)

The document contains 6 practice questions from chapters 10-12 of a textbook on finance. The questions test understanding of key concepts like the risk premium, efficient market hypotheses in weak, semi-strong and strong forms, and historical average returns of different asset classes.

Uploaded by

Christine Altamarino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Practice questions from chapters 10-12 (with a few “bonus questions from chapter 13).

1. The excess return required on a risky asset over that earned on a risk-free asset is called (a):
A) Risk premium.
B) Return premium.
C) Excess return.
D) Average return.
E) Variance.
Answer: A

2. An efficient capital market is one in which:


A) Brokerage commissions are zero.
B) Taxes are irrelevant.
C) Securities always offer a positive rate of return to investors.
D) Security prices are guaranteed (by the Securities and Exchange Commission) to be fair.
E) Security prices reflect available information.
Answer: E

3. The hypothesis that market prices reflect all available, public and private, information is called
efficiency in the:
A) Open form.
B) Strong form.
C) Semi-strong form.
D) Weak form.
E) Stable form.
Answer: B

4. The hypothesis that market prices reflect all publicly-available information is called efficiency in
the:
A) Open form.
B) Strong form.
C) Semi-strong form.
D) Weak form.
E) Stable form.
Answer: C

5. The hypothesis that market prices reflect all historical information is called efficiency in the:
A) Open form.
B) Strong form.
C) Semi-strong form.
D) Weak form.
E) Stable form.
Answer: D

6. Over the past 76 years, which of the following investments provided the largest average return?
A) Small company stocks
B) Common stocks
C) Treasury bills
D) Treasury bonds
E) Corporate bonds
Answer: A

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