Exam 7: Introduction to Risk and Return

For each additional 1 percent change in market return, the return on a stock having a beta of 2.2 changes, on average, by

For log normally distributed returns, annual compound returns equal

Low standard deviation stocks always have low betas.

If the covariance between stock A and stock B is 100, the standard deviation of stock A is 10 percent and that of stock B is 20 percent, calculate the correlation coefficient between the two securities.

Define the term risk premium.

For long-term U.S. government bonds, which risk concerns investors the most?

What has been the average annual rate of return in real terms for a portfolio of U.S. common stocks between 1900 and 2017?

The standard statistical measures of the variability of stock returns are beta and covariance.

One dollar invested in a portfolio of U.S. common stocks in 1900 would have grown in nominal value by the end of year 2017 to

Diversification can reduce portfolio risk even in the case when correlations across stock returns equal zero.