FIN 470 Final Exam Practice Questions
and Answers
As a financial analyst, you are tasked with evaluating a capital-budgeting project. You were instructed to
use the IRR method, and you need to determine an appropriate hurdle rate. The risk-free rate is 4%, and
the expected market rate of return...
A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 5%. What is
your approximate annual real rate of return if the rate of inflation was 1.5% over the year? - Ans:✔✔-
3.5%
Risk, Return, and Historical Record - Ans:✔✔-Question 4
You purchased a share of stock for $120. One year later, you received $1.82 as a dividend and sold the
share for $136. What was your holding-period return? - Ans:✔✔-None of the options are correct.
Other things equal, an increase in the government budget deficit - Ans:✔✔-drives the interest rate up.
Which of the following measures of risk best highlights the potential loss from extreme negative returns?
- Ans:✔✔-Value at risk (VaR)
Which of the following statement(s) is(are) true?
I) The real rate of interest is determined by the supply and demand for funds.
II) The real rate of interest is determined by the expected rate of inflation.
III) The real rate of interest can be affected by actions of the Fed.
IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation. -
Ans:✔✔-I and III only
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