CHAPTER 1—AN OVERVIEW OF THE INVESTMENT PROCESS TRUE/FALSE 1. The rate of exchange between certain future dollars and certain current dollars is known as the pure rate of interest. ANS: T PTS: 1 2. An investment is the current commitment of dollars over time to derive future payments to compensate the investor for the time funds are committed, the expected rate of inflation and the uncertainty of future payments. ANS: T PTS: 1 3. The holding period return (HPR) is equal to the holding period yield (HPY) stated as a percentage. ANS: F PTS: 1 4. The geometric mean of a series of returns is always larger than the arithmetic mean and the difference increases with the volatility of the series. ANS: F PTS: 1 5. The expected return is the average of all possible returns. ANS: F PTS: 1 6. Two measures of the risk premium are the standard deviation and the variance. ANS: F PTS: 1 7. The variance of expected returns is equal to the square root of the expected returns. ANS: F PTS: 1 8. The coefficient of variation is the expected return divided by the standard deviation of the expected return. ANS: F PTS: 1 9. Nominal rates are averages of a