Finance 3101 Keen Exam 2 Edition with
Correct Answers!!
What are the four elements needed to appropriately compare
alternative investments? - Correct Ans: ✔✔
1. profit or loss
2. size of original investment
3. timing (annualize return)
4. risk
What are HPRs, simple and compounded annual returns and how do
you compute them? - Correct Ans: ✔✔HPRs (holding period returns):
however long you hold an asset asset- HPR = HPR
simple returns: HPR/n
compound returns:
(1+HPR)^(1/n)-1
What is the relationship between the standard deviation (σ) and the
degree of risk? - Correct Ans: ✔✔standard deviation is the measure of
risk
Total risk = - Correct Ans: ✔✔total risk = unsystematic risk + systemic
risk
