Covariance of returns is positive

• A.when the return on one asset is above its expected value, the return on the other asset is above its expected value.
• B.when the return on one asset is below its expected value, the return on the other asset is above its expected value.
• C.when the return on one asset is above its expected value, the return on the other asset is also below its expected value.

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This is an example of

• A.Point and figure chart.
• B.Bar chart.
• C.Candlestick chart.

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The par value of a bond is

• A.the number of years over which the issuer has promised to meet the conditions of the obligation.
• B.the right of the issuer to retire the issue prior to the stated maturity date.
• C.the amount the issuer agrees to repay the bondholder by the maturity date.

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As part of a promotion for a new type of cracker, free trial samples are offered to shoppers in a local supermarket. The probability that a shopper will buy a packet of crackers after testing the free sample is
0 .20. Different shoppers can be regarded as independent trials. Let X be the number among the next 100 shoppers who buy a packet of the crackers after tasting a free sample, then X has approximately a

• A.N(4, 20) distribution.
• B.N(20, 4) distribution.
• C.N(0.2, 16) distribution.

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Stock A has a standard deviation of 16% and a beta of 1.1. T-bills are currently yielding 3.7% on an annualized basis. The expected return on the market index is 9.1% while its standard deviation is 14.9%.
If Stock B is expected to earn 10.51% and it is of equal risk to Stock A, which of the following statements would be the most accurate?

• A.Since Stock A has an expected return of 9.64%, it must be underpriced.
• B.Since Stock A has an expected return of 11.41%, it must be underpriced.
• C.Since Stock A has an expected return of 9.64%, it must be overpriced.

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