Liberty University BUSI352 Quiz 5 Complete Solutions Correct Answers Key

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Liberty UniversityBUSI352quiz5Complete Solutions Correct Answers KeyQuestion 1 An investor purchased a bond for $980, received $75 in interest, and then sold thebond for $950 after holding it for seven months. What is the holding period return?Question 2 The risk which a firm may not be able to meets its debt obligations is known as:Question 3 Cathy and her twin sister Carley, both age 25, each believe they have the superiorsavings plan. Cathy saved $5,000 at the end of each year for ten years then let her money growfor 30 years. Carley on the other hand waited 10 years then began saving $5,000 at the end ofeach year for 30 years. They both earned 9% on their investment and are 65 years old today andready to retire. Which of the following statements is correct?Question 4 The type of risk which measures the extent to which a firm uses debt securities andother forms of debt in its capital structure to finance is known as:Question 5 The type of risk which cannot be eliminated through diversification is:Question 6 Michael has an investment with the following annual returns for four years. Year 1: 12%Year 2:5% Year 3: 8% Year 4: 18% What is the arithmetic mean (AM) and what is the geometricmean (GM)?Question 7 Which of the following statements regarding investment risk is correct? 1: Beta is ameasure of systematic, nondiversifiable risk. 2: Rational investors will form portfolios and eliminatesystematicrisk.3:Rationalinvestorswillformportfoliosandeliminateunsystematicrisk.4:Systematic risk is the relevant risk for a welldiversified portfolio. 5: Beta captures all the riskinherent in an individual security.Question 8 Sylvia has two assets in her portfolio, asset A and asset B. Asset A has a standarddeviation of 40% and asset B has a standard deviation of 20%. 50% of her portfolio is invested inasset A and 50% is invested in asset B. The correlation for asset A and asset B is 0.90. What is thestandard deviation of her portfolio?Question 9 Municipal bonds that are backed by the income from specific projects are known as:Question 10 Mutual fund XYZ has a beta of 1.5, a standard deviation of 12%, and a correlation tothe S&P 500 of 0.80. How much return of fund XYZ is due to the S&P 500?Question 11 Which factors may affect an individual’s retirement plan? 1: Work life expectancy 2:Retirement life expectancy 3: Savings rate 4: Investment returns 5: Inflation

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