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FINRA Series 7 Risk and Return — practice questions

Explore 30 free Risk and Return questions in FINRA Series 7 Investments. Open each question or exercise to read its content, reference answers and available explanation.

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Risk and Return questions and exercises with answers

Showing questions 1–30 of 30.

An investor adds up everything a holding actually returned over a period. That figure is the:Read the answer and worked solution →A share bought at 40 is now worth 46. That six-point rise in value is a:Read the answer and worked solution →Dividends received divided by the initial share price gives the:Read the answer and worked solution →The change in share price divided by the initial price gives the:Read the answer and worked solution →The most common measure of how much returns bounce around is the:Read the answer and worked solution →In finance, that bouncing around of returns is itself treated as:Read the answer and worked solution →A lawsuit against one company, or an accounting scandal at one firm, is an example of:Read the answer and worked solution →To protect against a single company collapsing, investors own a variety of stocks. That practice is:Read the answer and worked solution →The point of holding many companies is that if one goes under from poor management, you:Read the answer and worked solution →A statistic describing how two variables move relative to each other is the:Read the answer and worked solution →A correlation coefficient of 1 means the two variables move:Read the answer and worked solution →Because firm-specific risk can be diversified away, the risk that actually matters to investors is:Read the answer and worked solution →A stock that moves in step with the market as a whole has a beta of:Read the answer and worked solution →For a stock like that, if the market falls 5 percent, the stock tends to fall:Read the answer and worked solution →An airline stock carries 139 percent of the average stock's systematic risk. Investors in it should therefore receive 139 percent of the market:Read the answer and worked solution →The pricing model behind that reasoning rests on the idea that investors bearing higher systematic risk should be:Read the answer and worked solution →An analyst needs a proxy for the risk-free rate. She uses the rate earned on:Read the answer and worked solution →The extra return earned for taking on risk, over what a riskless investment would pay, is the risk:Read the answer and worked solution →In the pricing model equation, the symbol standing for what the asset is expected to earn is the:Read the answer and worked solution →A compounded annual return worked out from the effective annual rate is also known as the:Read the answer and worked solution →A student compares one stock with a whole portfolio. The reason to hold many rather than one favourite is to reduce:Read the answer and worked solution →An analyst reports a standard deviation of returns of 51.9 percent for one airline over a ten-year sample. That figure measures its:Read the answer and worked solution →Catch the return measuresRead the answer and worked solution →Pop the risk wordsRead the answer and worked solution →Run the investing gatesRead the answer and worked solution →Slice the investing wordsRead the answer and worked solution →Diversifiable or notRead the answer and worked solution →Sort the investing wordsRead the answer and worked solution →Type the numberRead the answer and worked solution →Risk and return bingoRead the answer and worked solution →

Worked practice questions

An investor adds up everything a holding actually returned over a period. That figure is the:

  1. Realized return
  2. Rejected return
  3. Reserved return
  4. Reduced return
Show answer and solution

Correct answer: A. Realized return

1. The period has already passed. 2. It is the total over that time. 3. It is the realized return. _Source: OpenStax Principles of Finance 2e, Chapter 15, How to Think about Investing._

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A share bought at 40 is now worth 46. That six-point rise in value is a:

  1. Coupon rate
  2. Capital gain
  3. Credit spread
  4. Currency swap
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Correct answer: B. Capital gain

1. No dividend is involved. 2. The price itself moved up. 3. It is a capital gain. _Source: OpenStax Principles of Finance 2e, Chapter 15, How to Think about Investing._

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Dividends received divided by the initial share price gives the:

  1. Dividend yield
  2. Debt ratio
  3. Payout ratio
  4. Price ratio
Show answer and solution

Correct answer: A. Dividend yield

1. Dividends sit on top. 2. The starting price sits below. 3. It is the dividend yield. _Source: OpenStax Principles of Finance 2e, Chapter 15, How to Think about Investing._

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