1. If an investment has a 20%(0.20) probability of returning $1,000; a 30%(0.30) probability of returning $1,500; and a 50%(0.50) probability of returning $1,800; the expected value of the investment is:
A. $1,433.33
B. $1,550.00
C. $2,800.00
D. $1,600.00
2. Uncertainties that are not quantifiable:
A. are what we define as risk.
B. are factored into the price of an asset.
C. cannot be priced.
D. are benchmarks against which quantifiable risks can be assessed.
3. What is the future value of $1,000 after six months earning 12% annually?
A. $1,050.00
B. $1,060.00
C. $1,120.00
D. $1,058.30
4. The price of a coupon bond is determined by:
A. taking the present value of the bond's final payment and subtracting the coupon payments.
B. taking the present value of the coupon payments and adding this to the face value.
C. taking the present value of all of the bond's payments.
D. estimating its future value.
5. Suppose that Fly-By-Night Airlines Inc., has a return of 5% twenty percent of the time and 0% the rest of the time. The expected return from Fly-By-Night is
A. 10%.
B. 0.1%.
C. 0.2%.
D. 1.0%.