Question

11.

____ is the return of the bond when held to maturity.

Select one:

a. Discount rate

b. Yield to maturity

c. Nominal rate

d. Coupon rate

12.

The expected return of a stock for a year is equal to expected dividend plus ____ divided by purchase price of the stock.

Select one:

a. capital gain or loss

b. purchase price

c. expected price

d. current price

13.

A manager of a bond portfolio, with the expectation of a fall in interest rates and accompanying increase in capital gains, will ____.

Select one:

a. sell bonds held in the portfolio

b. purchase more bonds

c. None of the above

d. sell bonds that have short-term maturities

14.

It is the ____ return on stocks and bonds that determine their prices.

Select one:

a. average

b. interest

c. expected

d. earnings

15.

Changes in the money supply, national income, and inflationary expectations will affect ____ rates.

Select one:

a. long-term

b. short-term

c. average

d. intermediate

Answer 1

11.

B) YTM is the return on bond when held to maturity

The rest of the options are incorrect as they dont fulfill the maturity criteria and ytm is earned if kept till maturity

12.

C ) expected price

This is because expected return = expected price + dividends / purchase price

Rest of the options dont meet the formula

13. The portfolio manager will buy more bonds

This is because in future if interest rate falls, his bonds will become more valuable since they wilk have higher interest rates

This is why others options are incorrect

14. Expected return is the answer

This is because the expected return makes the market forces of demand and supply to work.

I hope this makes sense

Answered 4 as per policy

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