Question

1.Which of the following statement is not true about interest rate risk? (Only one correct answer.)...

1.Which of the following statement is not true about interest rate risk? (Only one correct answer.)

Select one:

a. Bond prices are negatively related to interest rate movements.

b. Lower coupon bonds have lower interest rate risk.

c. Long term bonds have higher interest rate risk than short term bonds.

d. Interest rate risk is the uncertainty of how the bond price will change following the interest rate changes.

2.Which one of the following statements best describes two mutually exclusive investments? (Only one correct answer.)

Select one:

a. To build a theatre and a restaurant side by side

b. To build a parking lot for the benefit of both the theatre and the restaurant

c. To build either a theatre or a restaurant on a corner lot

d. To build both a parking lot and a restaurant on a corner lot

3. A portfolio is a(n) _________. (Only one correct answer.)

Select one:

a. group of assets held by an investor

b. term commonly used to refer to systematic risk

c. asset that has a standard deviation less than 1

d. type of risk-free asset

4.What common method of share valuation would be best suited for a mature company with an established history of regular dividend payments. (Only one correct answer.)

Select one:

a. Net present value of an annuity.

b. Dividend discount model with a constant growth rate

c. Dividend discount model with mixed growth rates

d. Present value of an annuity.

5.Which of the following entities is specialised in the investments in emerging businesses at the very early stage in small deals? (Only one correct answer.)

Select one:

a. venture capital funds

b. superannuation funds

c. insurance companies

d. investment banks

Homework Answers

Answer #1

1. Option b is not correct. Changes in the bond do not depends on the coupon payments but on the changes in interest rates.

2. Mutually exclusive means selecting only one project. option c is correct

Building either a theatre or a restaurant is only single option

3. Portfolio is group of assets held by an investor Option a is correct

4. If a company is in mature stage and expecting the dividends, the dividends can be expected without much fluctuations. We have to use Dividend discount model with a constant growth rate

Option b is correct

5. Venture capital funds (Option a is correct)

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