Which of the following statements is FALSE regarding a portfolio where each security is held in proportion to its market capitalization? It is known as the Market Portfolio. It reflects the overall market performance. It is called a price-weighted portfolio. It is a type of index fund.

It is called a price-weighted portfolio.

Which of the following statements is FALSE about the S&P 500? The S&P 500 is an equal-weighted portfolio. It consists of 500 of the largest U.S. stocks. It is a market-capitalization-weighted index. It is widely used as a benchmark for U.S. equities.

The S&P 500 is an equal-weighted portfolio.

Which of the following statements is FALSE about beta estimation? Beta is used for investors holding the market portfolio. Beta measures the diversifiable risk of a security. Beta measures the systematic risk of a security. Beta is the appropriate measure of market risk.

Beta measures the diversifiable risk of a security.

Which of the following statements is FALSE regarding securities and their beta values? A beta less than 1 indicates lower volatility than the market. A beta of 1 indicates movement with the market. Securities that move more than the market have betas lower than 0. A beta greater than 1 indicates higher volatility than the market.

Securities that move more than the market have betas lower than 0.

Financial Portfolio Management: Market Indices, Beta Estimation, and Expected Returns

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Finance - Personal Finance

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Cards in this deck(75)

Which of the following statements is FALSE regarding a portfolio where each security is held in proportion to its market capitalization?

Which of the following statements is FALSE about the S&P 500?

In practice, which market index is most widely used as a proxy for the market portfolio in the CAPM?

The market capitalization for Walmart is closest to which of the following amounts?

Which of the following statements is FALSE about beta estimation?

Which of the following statements is FALSE regarding securities and their beta values?

Wyatt Oil has a bond issue outstanding with a yield to maturity of 7.0% and a BBB rating. The risk-free rate is 3% and the market risk premium is 5%. Assuming a normal economy, the expected return on Wyatt Oil's debt is closest to:

Rearden Metal has a bond issue outstanding with a yield to maturity of 8.6% and a B rating. The risk-free rate is 3% and the market risk premium is 6%. Assuming a normal economy, the expected return on Rearden Metal's debt is closest to:

The firm will pay the dividend to all shareholders who are registered owners on a specific date, set by the board, called the:

Anyone who purchases the stock on or after the _____ date will not receive the dividend.

A firm can repurchase shares through a(n) _____ in which it offers to buy shares at a pre-specified price during a short time period—generally within 20 days.

Which of the following statements is FALSE regarding market imperfections and dividend decisions?

Which of the following statements is FALSE regarding dividends and share repurchases?

Which of the following statements is FALSE regarding investor preferences for dividends?

Which of the following statements is FALSE regarding a firm's cash holding decisions?

Which of the following statements is FALSE regarding dividend cuts and repurchases?

Which of the following statements is FALSE regarding managers' commitment to dividends and share repurchases?

Taggart Transcontinental shares are currently trading at $200 per share. What split ratio is needed to bring the stock price down to $80?

Which of the following statements is FALSE regarding stock trading?

Which of the following statements is FALSE regarding dividend distribution methods?

Which of the following statements is NOT true regarding Angel Investors?

Which of the following statements is NOT true regarding venture capitalists?

Which of the following statements is FALSE regarding equity sales by company founders?

Which of the following statements is FALSE regarding preferred stock issued by young companies?

Which of the following statements is FALSE regarding the process of selling stock to the public?

Which of the following statements is FALSE regarding shares sold in an IPO?

A part of the registration statement called the preliminary prospectus circulates to investors before the stock is offered. This preliminary prospectus is also called a(n):

Which of the following statements is FALSE regarding an 'allocation trip' during an IPO process?

Which of the following is NOT one of the four characteristics of IPOs that puzzle financial economists?

Aaron Inc went public at $10 per share. Aaron's investment banker charged them $0.70 per share for the IPO. This fee is called a(n):

Which of the following is FALSE regarding a firm's need for outside capital after an IPO?

Which of the following statements is FALSE regarding a cash offer?

Which of the following statements is FALSE regarding the market's reaction to a seasoned equity offering (SEO)?

What type of corporate debt is backed by specific assets?

What kind of unsecured corporate debt has a maturity of less than ten years?

Bonds issued by a foreign company in a local market, intended for local investors, and denominated in the local currency are known as:

Which of the following statements is FALSE regarding a leveraged buyout (LBO)?

Which of the following statements is FALSE regarding debenture issues?

Which of the following statements is FALSE regarding private placements?

Treasury securities that are semiannual coupon bonds with original maturities of between 1 and 10 years are called:

Treasury securities that are standard coupon bonds where the outstanding principal is adjusted for inflation are called:

Which of the following statements is FALSE regarding the initial sale of Treasury securities?

Which of the following statements is FALSE regarding government-backed enterprises?

Packaging a portfolio of financial securities and issuing an asset-backed security backed by this portfolio is known as:

When banks re-securitize other asset-backed securities, the new asset-backed security is known as a:

Mortgages that do not meet certain credit criteria and have a high probability of default are known as _____ mortgages.

Which of the following statements regarding bonds is FALSE?

Which of the following statements regarding callable bonds is FALSE?

Which of the following regarding sinking fund provisions is FALSE?

Which of the following statements regarding convertible bonds is FALSE?

A firm's unlevered (asset) beta is:

The firm's unlevered (asset) cost of capital is:

Which of the following is TRUE of asset betas?

The difference between the weighted average cost of capital (WACC) and the pre-tax unlevered WACC is:

Assume that the S&P 500 currently has a dividend yield of 3% and that on average, the dividends of S&P 500 firms have increased by about 5% per year. If the risk-free interest rate is 4%, then your estimate for the future market risk premium is:

When should you use equity in relation to following and bond?

Why is offering in relation to false and shares?

How can you improve bonds in relation to statements and debt?

When a private equity firm purchases the outstanding equity of a publicly traded firm, thereby taking the company private, the transaction is called:

Which of the following statements is FALSE regarding the process of selling stock to the public?

Which of the following statements is FALSE regarding shares sold in an IPO?

Which of the following statements regarding firm commitment IPOs is FALSE?

Which of the following is NOT one of the four characteristics of IPOs that puzzle financial economists?

How does that in relation to stock and capital?

Do underwriters face the most risk from a best effort IPO, a firm IPO, or an auction IPO?

What is IPO underpricing? If you decide to try to buy shares in every IPO, will you necessarily make money from the underpricing?

What are the advantages to a company of selling stock in a seasoned equity offering (SEO) using a cash offer? What are the advantages of a rights offer?

From the start of 1999 to the start of 2009, the S&P 500 had a negative return. Does this mean the market risk premium we should have used in the CAPM was negative?

Which of the following statements regarding the yield calculation of a callable bond is FALSE?

You own a bond with a face value of $1000 and a conversion price of $40. The conversion ratio is closest to:

A(n) _____ cash flows come from the cash flows of underlying financial securities.

Describe what prepayment risk in a GNMA is.

What is the difference between a foreign bond and a Eurobond?

Explain some of the differences between a public debt offering and a private debt offering.

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