For the following tasks, select the correct answer. a) When comparing investments with different horizons, the _________

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For the following tasks, select the correct answer.
a) When comparing investments with different horizons, the
____________ provides the more accurate comparison. Choose the
correct answer.
A. arithmetic average
B. effective annual rate
C. average annual return
D. historical annual average
b) Which of the following statements is(are) true?
I) Risk-averse investors reject
investments that are fair games.
II) Risk-neutral investors judge risky
investments only by the expected returns.
III) Risk-averse investors judge
investments only by their riskiness.
IV) Risk-loving investors will not
engage in fair games.
A. I only
B. II only
C. I and II only
D. II and III only
E. II, III, and IV only
c) A hedge ratio for a call option is ________, and a hedge
ratio for a put option is ______.
A. negative; positive
B. negative; negative
C. positive; negative
D. positive; positive
E. zero; zero
d) A futures contract
A. is an agreement to buy or sell a specified
amount of an asset at the spot price on the expiration date of the
contract.
B. is an agreement to buy or sell a specified
amount of an asset at a predetermined price on the expiration date
of the contract.
C. gives the buyer the right, but not the
obligation, to buy an asset sometime in the future.
D. is a contract to be signed in the future
by the buyer and the seller of the commodity.
E. None of the options are correct.
e) If a stock index futures contract is overpriced, you would
exploit this situation by
A. selling both the stock index
futures and the stocks in the index.
B. selling the stock index futures and
simultaneously buying the stocks in the index.
C. buying both the stock index futures
and the stocks in the index.
D. buying the stock index futures and
selling the stocks in the index.
E. None of the options are
correct.
f) Which pricing model provides no guidance concerning the
determination of the risk premium on factor portfolios?
A. The CAPM
B. The multifactor APT
C. Both the CAPM and the multifactor
APT
D. Neither the CAPM nor the
multifactor APT
E. None of the options are
correct.
g) Which of the following statement(s) is(are) true regarding
the selection of a portfolio from those that lie on the capital
allocation line?
I) Less risk-averse investors will invest more in the risk-free
security and less in the optimal risky portfolio than more
risk-averse investors.
II) More risk-averse investors will invest less in the optimal
risky portfolio and more in the risk-free security than less
risk-averse investors.
III) Investors choose the portfolio that maximizes their
expected utility.
A. I only
B. II only
C. III only
D. I and III
E. II and III