Finance Quiz: Risk and Return

What is the measure of an asset's performance in the finance world?

• Return

• Risk

• Profit

• Loss

What is the formula to calculate the rate of return?

• Ending Price + Distributions - Beginning Price / Beginning Price

• Dollar Profit or Loss / Original Cost

• Ending Value - Original Cost

• Profit / Cost

Tags

CCSS.8.F.B.4

CCSS.HSF.IF.B.6

What is the measure of the percentage of change or the ratio of the gain (or loss) to the cost of the investment?

• Rate of Return

• Original Cost

• Holding Period Return

• Dollar Profit or Loss

What is the purpose of converting holding period returns to annual returns?

• To confuse investors

• To compare investments based on returns

• To increase risk

• To complicate calculations

Tags

CCSS.HSS.MD.A.2

How is risk defined in terms of uncertainty?

• Knowing what is going to happen before it happens

• The absence of knowledge of the actual outcome of an event before it happens

• The certainty of outcomes

• The elimination of potential loss

What are variance and standard deviation used for in finance?

• To predict future stock prices

• To measure the uncertainty in a set of potential outcomes

• To eliminate risk

• To calculate expected returns

What is the formula to calculate variance?

• ∑(R-Mean)^2 / (n-1)

• √Variance

• ∑[Return in Statei - E(r)]^2 * Probability of Statei

• ∑Probability of Economic State * Return in Economic State

What is the purpose of determining the probabilities of all potential outcomes in finance?

• To complicate the investment process

• To increase risk

• To confuse investors

• To calculate expected return and risk measurement

According to investment rule number 1, what should be done if faced with 2 investment choices having the same expected returns?

• Select the one with the lower expected return

• Select the one with the higher expected return

• Select the one with the lower expected risk

• Select the one with the higher expected risk

Tags

CCSS.HSS.MD.B.5B

What is the key to minimizing risk in a world fraught with uncertainty and risk?

• Increasing risk

• Maximizing return

• Avoiding investments

• Diversification

Tags

CCSS.HSS.MD.B.6

CCSS.HSS.MD.B.7