1. If investment return is stated in dollars, to make a decision regarding return adequacy you also need to know:
a. only the scale of investment.
b. only the timing of the return
c. both the scale of investment and the timing of the return
d. neither of the above
2. Risk can be analyzed:
a. only on a stand-alone basis
b. only on a portfolio basis.
c. both on a stand-alone and portfolio basis.
d. neither of the above is correct.
3. The coefficient of variation:
a. is a stand-alone risk measure
b. provides an idea of how far above or below the expected value the actual value is likely to be
c. shows the risk per unit of return
d. a and c are correct
4. ______________ is a measure of market risk which is the extent to which the returns on a stock move with the market.
a. Beta
b. Standard deviation
c. Coefficient of variation
d. Expected return
5. Which of the following statements best describes what would be expected to happen as you randomly add stocks to your portfolio?
a. Adding more stocks to your portfolio reduces the portfolio’s company-specific risk.
b. Adding more stocks to your portfolio reduces the beta of your portfolio.
c. Adding more stocks to your portfolio increases the portfolio’s expected return.
d. All of the statements above are correct.
6. Stock A has a beta of 1.0 and Stock B has a beta of 0.8. Which of the following statements must be true about these securities? (Assume the market is in equilibrium.)
a. When held in isolation, Stock A has greater risk than Stock B.
b. Stock B would be a more desirable addition to a portfolio than Stock A.
c. Stock A would be a more desirable addition to a portfolio than Stock B.
d. The expected return on Stock A will be greater than that on Stock B.
e. The expected return on Stock B will be greater than that on Stock A.
7. For management whose primary goal is stock price maximization, the relevant risk of any physical asset should be measured in terms of its effect on the risk of the firm’s stock.
a. True
b. False
8. If the risk-free rate is 6.0%, the market risk premium is 13.0%, and the expected return on Security J is 14.7%, what is the beta for Security J?
a. 0.92
b. 1.24
c. 1.52
d. 0.48
e. 0.67
9. You are holding a stock that has a beta of 3.29 and is currently in equilibrium. The required return on the stock is 21.67%, and the return on the market portfolio is 10.20%. What would be the new required return on the stock if the return on the market increased to 13.00% while the risk-free rate and beta remained unchanged?
a. 40.77%
b. 47.96%
c. 21.67%
d. 30.88%
e. 25.55%
10. The risk-free return is 3.2% and the market return is 11.6%. What is the expected return for the following portfolio? (State your answer in percent with two decimal places.)
a. 21.78%
b. 13.45%
c. 16.65%
d. 18.58%
e. 16.02%
2007-01-26
10:20:41
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4 answers
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asked by
**LIBERTY**
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Business & Finance
➔ Other - Business & Finance