Consider two $60,000 investments – call them Investment A and
Investment B. Both investments will earn $5,000 with a probability
of 0.5 and $1,000 with a probability of 0.5. Investment A will use
100% equity financing (issuing stocks). Investment B will get
$30,000 through issuing stocks and $30,000 through issuing bonds.
Investment B must pay 4% interest on the bonds.
a. Calculate the expected returns on equity (returns after
interest payments divided by the amount of equity) for Investment A...
Investments A, B, and C all have the following
characteristics:
A
B
C
Expected Return
10%
10%
10%
Standard Deviation
8%
8%
8%
Skewness
1.5
0.4
-0.8
Excess Kurtosis
-0.6
0
1.2
For an investor who is most concerned about not losing
principal, the best investment and the worst investment are likely
to be, respectively:
A.) A the best and B the worst
B.) B the best and A the worst
C.) B the best and C the worst
D.)...
Which of the following are ways that a private insurance company
or the federal government controls rising prescription drug
expenditures? (Choose all that apply)
a. Three-tiered formularies
b. cost-sharing
c. annual limits on the number of prescriptions that can be
filled
d. mandatory substitution of generics price controls
Which of the following is an example of what backs fiat
money?
bartering arrangements
trust the public has that it can be exchanged for services and
goods
precious metals such as silver
If the reserve requirement is 10 percent and a monetary
expansion increases excess reserves by $5 million, the total change
in the money supply after all rounds of
100 million
50 million
5 million
What is an example of a security?
Fiat money
Checking account
Credit cards
All...
Which of the following investments has the highest effective
return? (All are of equal risk)
A bank CD which pays 10%, compounded monthly
A bank CD which pays 10.5%, compounded annually
A bank CD which pays 10%, compounded quarterly
A bank CD which pays 10.3%, compounded semiannually
A bank CD which pays 9.6%, compounded daily (on a 365-day
basis)
Liabilities of insurance companies may
include all but which of the following?Policy claims.Contract loans.Net policy reserves.Deposit-type contracts.Separate account business.
The Johnsons own a homeowners’ insurance policy already. Which
of the following risks will require them to purchase separate
insurance coverage?
A : A lawsuit from a neighbor injured at a house party.
B : A kitchen fire.
C : The home is in a flood plain.
D : Theft from a break-in.
which of the following investments is considered to be default
risk-free? 1. common stock 2. currency optiONS 3. TREASURY BILLS 4.
AAA RATED CORPORATE BONDS