midterm - true/false (moncap)
Quiz by Robert Couch
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34 questions
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- Q1The yield to maturity (YTM) is defined as the discount rate that makes the present value of a bond’s payments equal to its price.……FALSETRUE30s
- Q2A good way to value a security is to discount its expected cash flows by the appropriate discount rate.……TRUEFALSE30s
- Q3The reward from an investment is its expected return, which is equal to the probability-weighted average of the future payoffs calculated as a percentage of the cost of investment.FALSE…TRUE…30s
- Q4Financial markets help allocate risk in a way that benefits firms needing to raise capital to finance their investments.…TRUEFALSE…30s
- Q5After the 1980s, inflation in the U.S. has been fairly low and stable.……FALSETRUE30s
- Q6If operating risk for a firm increases, the yield to maturity for its bonds should go up.…TRUEFALSE…30s
- Q7If a financial crisis is imminent, expected VaR measures should worsen (i.e., become more negative).TRUEFALSE……30s
- Q8Derivatives are financial assets.TRUE……FALSE30s
- Q9A 2-for-1 stock split should not affect shareholder returns, because the larger number of shares outstanding will offset the change in the stock price.TRUEFALSE……30s
- Q10Investors who believe that financial markets are very efficient will be inclined to follow a passive rather than active investing strategy.FALSE……TRUE30s
- Q11You buy two similar bonds, A and B. Then default risk for A goes up. If you sell both bonds then your holding-period return on A will be lower than for B.TRUE……FALSE30s
- Q12You buy two bonds, A and B. If A has a longer duration, you should it expect its price to be more sensitive to interest rate changes, all else equal.…FALSETRUE…30s
- Q13Expectations theory can explain why inverted yield curves tend to predict recessions.FALSE…TRUE…30s
- Q14ETF stands for “exchange traded fund.”…FALSETRUE…30s
- Q15Despite some weaknesses of financial markets, one strength is that they generate useful forward-looking information about economic value.TRUE…FALSE…30s