1. The realized rate of return, or holding period return, is equal to the holding period dollar gain divided by the price at the beginning of the period.

2. The risk-return tradeoff that investors face on a day-to-day basis is based on realized rates of return because expected returns involve too much uncertainty.

3. Variation in the rate of return of an investment is a measure of the riskiness of that investment.

4. A rational investor will always prefer an investment with a lower standard deviation of returns, because such investments are less risky.

5. For a well-diversified investor, an investment with an expected return of 10% with a standard deviation of 3% dominates an investment with an expected return of 10% with a standard deviation of 5%.

6. Due to strict stock market controls, the most a stock's value can drop in one trading day is 5%.

7. Subordinated debentures are more risky than unsubordinated debentures because the claims of subordinated debenture holders are less likely to be honored in the event of liquidation.

8. An example of a Eurobond is a bond issued in Asia by a U.S. Corporation with interest and principal payments made in U.S. dollars.

9. Convertible bonds decrease in value whenever the price of the company's stock increases. 10. Junk bonds are also called high-yield bonds. 11. The expected yield on junk bonds is higher than the yield on AAA-rated bonds because of the higher default risk associated with junk bonds.

12. Bonds issued in a country different from the one in which the currency of the bond is denominated are called Eurobonds.

13. Convertible bonds are debt securities that can be converted into a firm's stock at a prespecified price.

14. A mortgage bond is secured by a lien on real property.

Answer rating: 100% (QA)

1 T 2 T 3 F ... View the full answer