Question

10.Which one of the following statements is NOT true?

Select one:

A. The risk that the lender may not receive payments as promised is called default risk.

B. Investors must pay a premium (a higher price) to purchase a security that exposes them to default risk.

C. Australian government securities are assumed not have any default risk and are adopted as the best proxy measure for the risk-free rate.

D. The greater the risk of an investment, the greater the return that investors require.

11.Bonds sell at a discount off the par value when market yield to maturity for the bond is:

Select one:

A. less than the bond's coupon rate.

B. greater than the bond's coupon rate.

C. equal to the bond's coupon rate.

D. Market rates are irrelevant in determining a bond's price.

12.The strong-form version of the efficient market hypothesis states that stock prices reflects ______________ information relevant to the firm.

Select one:

A. all publicly available as well as company inside

B. all publicly available financial and economic

C. all publicly available

D. all private inside

13.Which one of the following statements is NOT true?

Select one:

A. The overall efficiency of a capital market depends on its operational efficiency and its informational efficiency.

B. Operational efficiency focuses on bringing buyers and sellers together at the lowest possible cost.

C. If market prices reflect all public information about securities at a particular point in time, the market is semi-strong form efficient.

D. If market prices reflect all public relevant information about securities at a particular point in time, the market is strong-form efficient

Answer 1

10.

The default risk can be described as the risk of not receiving back the money provided to a borrower. Thus statement A is true.

An investor will always ready to pay the lower price against the security that exposes default risk. Thus statement B is not true.

There is zero default risk attached to Australian government securities. Thus, statement C is true.

The investor requires greater returns with greater risk. Thus, statement D is true.

The correct option is "B".