Deck 3: Risk

Question 1

In general, the chances of receiving back an investment in a large market Major League Baseball team is __________ that for a small market team.

A) Less than
B) Slightly less than
C) Equal to
D) Greater than
E) None of the above

Answer 1

D

Question 2

Risk increases as the length of time funds are invested increases. What is this known as?

A) Risk of time
B) Level of risk
C) Risk premium
D) Liquidity premium
E) None of the above

Answer 2

A

Question 3

Which of the following is the nominal or quoted risk-free rate of interest?

A) The real-risk-free rate plus an inflation premium
B) The real-risk-free rate plus a default risk premium
C) The real-risk-free rate plus a liquidity premium
D) The real-risk-free rate plus a maturity risk premium
E) None of the above

Answer 3

A

Question 4

When calculating the nominal interest rate, which of the following premiums is added to account for the risk of time and interest rate risk?

A) Inflation premium
B) Liquidity premium
C) Default risk premium
D) Maturity risk premium
E) None of the above

Question 5

One source of risk is current economic conditions. Of the following, which is impacted by changes in current economic conditions?

A) Capital finance
B) Operating budgets
C) League loan pools
D) Both a and b
E) a, b, and c are all impacted

Question 6

Which of the following was the first major professional sports team to declare bankruptcy in the middle of a long-term facility lease?

A) New York Yankees
B) Phoenix Coyotes
C) Milwaukee Brewers
D) San Francisco Giants
E) New England Patriots

Question 7

What is determined by comparing the risk of one asset to another?

A) Risk of time
B) Level of risk
C) Risk premium
D) Liquidity premium
E) None of the above

Question 8

Which of the following is the rate of return required over and above the risk-free-rate?

A) Risk of time
B) Level of risk
C) Risk premium
D) Liquidity premium
E) None of the above

Question 9

If it is expected that it will be hard to sell a security, which of the following will be added?

A) Inflation risk premium
B) Default risk premium
C) Liquidity premium
D) Maturity risk premium
E) None of the above

Question 10

For this type of bond, the annualized interest rate on the bonds is reset at auctions held every 7 to 35 days.

A) General obligation bonds
B) Auction-rate bonds
C) Lease revenue bonds
D) Revenue bonds
E) All of the above

Question 11

Much has been written about financial risk in sport.

Question 12

The gain or loss of an investment over a period of time is the rate of return.

Question 13

Often there is not much difference in level of risk between franchises in leagues.

Question 14

The default risk premium is the portion of an investment's return that compensates the investor for loss of purchasing power over time.

Question 15

The smallest degree of risk bond loans will have a AAA rating.

Question 16

An investor chooses assets with the goal of maximizing the return of the overall portfolio while minimizing overall risk.

Question 17

Correlations reflect the degree to which three or more assets change together.

Question 18

As volatility decreases, risk increases.

Question 19

For many sport organizations, their most significant revenue comes from sources protected by long-term contracts.

Question 20

The MLB and NBA both operate under a revenue sharing model where the league provides increased revenue allocations to teams with low local revenues.