Determine the beta of a portfolio consisting of the following common stocks: \[\begin{array} { l l l } \text { Security } & \text { Market Value } & \text { Beta } \\ \text { Boeing } & \$ 5,000 & 1.2 \\ \text { Exxon } & \$ 4,000 & 0.8 \\ \text { Duke Power } & \$ 2,500 & 0.6 \\ \text { Blockbuster Video } & \$ 2,000 & 1.4 \\ \text { Coca-Cola } & \$ 7,500 & 1.0 \end{array}\]

A) 0.93 B) 0.85 C) 1.00 D) 1.14 A) 0.93 B) 0.85 C) 1.00 D) 1.14

Exam 9: Analysis of Risk and Return

Determine the beta of a portfolio consisting of the following common stocks: Security Market Value Beta Boeing \ 5,000 1.2 Exxon \ 4,000 0.8 Duke Power \ 2,500 0.6 Blockbuster Video \ 2,000 1.4 Coca-Cola \ 7,500 1.0

(Multiple Choice)

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Question 61

Texas Computers (TC) stock has a beta of 1.5, and American Water (AW) stock has a beta of 0.5. Which of the following statements will be true about these securities?

(Multiple Choice)

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Question 62

Security A offers an expected return of 14%, with a standard deviation of 8%. Security B offers an expected return of 11%, with a standard deviation of 6%. If you wish to construct a portfolio with a 12.8% expected return, what percentage of the portfolio will consist of security A?

(Multiple Choice)

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Question 63

Which of the following statements is (are) correct? I. Unsystematic risk can be eliminated through diversification. II. Unsystematic risk is the relevant portion of an asset's risk attributable to market factors that affect all firms, like inflation, political events, etc.

(Multiple Choice)

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Question 64

____ can be achieved by investing in a set of securities that have different risk-return characteristics.

(Multiple Choice)

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Question 65

The security market line can be thought of as expressing relationships between required rates of return and ____.

(Multiple Choice)

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Question 66

A portfolio is efficient if which of the following is true?

(Multiple Choice)

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Question 67

The ____ theory of the yield curve holds that required returns on long-term securities tend to be greater the longer the time to maturity.

(Multiple Choice)

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Question 68

The default risk premium reflects the fact that ____.

(Multiple Choice)

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Question 69

Elephant Company common stock has a beta of 1.2. The risk-free rate is 6%, and the expected market rate of return is 12%. Determine the required rate of return on the security.

(Multiple Choice)

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Question 70

On the capital market line (CML), any risk-return combination beyond the Market Portfolio (m) is obtained by ____.

(Multiple Choice)

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Question 71

Which of the following statements regarding risk is (are) correct? I. A portfolio of two negatively correlated assets has less risk than either of the individual assets, and risk could be further reduced to 0 or below. II. There is no case where creating a portfolio of assets will result in greater risk than that of the riskiest asset included in the portfolio.

(Multiple Choice)

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Question 72

Common stockholders require a higher rate of return than do holders of Aaa-rated bonds. This reflects which type of risk premium?

(Multiple Choice)

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Question 73

The term structure of interest rates is the pattern of interest rate yields for securities that differ only in ____.

(Multiple Choice)

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Question 74

In general, when the correlation coefficient between the returns on two securities is , the risk of a portfolio is the weighted average of the total risk of the two individual securities.

(Multiple Choice)

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Question 75

Quick Start Inc. is expected to pay a dividend of $1.05 next year and dividends are expected to continue their 7% annual growth rate. The SML has been estimated as follows: K_j = 0.08 + 0.064β_j Assuming Quick Start has a beta of 1.1, what would happen to its stock price if inflation expectations went from the current 5% to 8%?

(Multiple Choice)

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Question 76

The business risk of a firm refers to the ____.

(Multiple Choice)

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Question 77

Sally's broker told her that the expected return from her portfolio was 14.2%. If 40% of her securities have an expected return of 10.3% and 20% have an expected return of 12.8%, what is the expected return of the remaining portion of her portfolio?

(Multiple Choice)

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Question 78

Which of the following would be considered a risk-free investment?

(Multiple Choice)

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Question 79

Beta is defined as ____.

(Multiple Choice)

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Question 80

Showing 61 - 80 of 118

Exam 9: Analysis of Risk and Return

Determine the beta of a portfolio consisting of the following common stocks: Security Market Value Beta Boeing \ 5,000 1.2 Exxon \ 4,000 0.8 Duke Power \ 2,500 0.6 Blockbuster Video \ 2,000 1.4 Coca-Cola \ 7,500 1.0

Texas Computers (TC) stock has a beta of 1.5, and American Water (AW) stock has a beta of 0.5. Which of the following statements will be true about these securities?

Security A offers an expected return of 14%, with a standard deviation of 8%. Security B offers an expected return of 11%, with a standard deviation of 6%. If you wish to construct a portfolio with a 12.8% expected return, what percentage of the portfolio will consist of security A?

Which of the following statements is (are) correct? I. Unsystematic risk can be eliminated through diversification. II. Unsystematic risk is the relevant portion of an asset's risk attributable to market factors that affect all firms, like inflation, political events, etc.

____ can be achieved by investing in a set of securities that have different risk-return characteristics.

The security market line can be thought of as expressing relationships between required rates of return and ____.

A portfolio is efficient if which of the following is true?

The ____ theory of the yield curve holds that required returns on long-term securities tend to be greater the longer the time to maturity.

The default risk premium reflects the fact that ____.

Elephant Company common stock has a beta of 1.2. The risk-free rate is 6%, and the expected market rate of return is 12%. Determine the required rate of return on the security.

On the capital market line (CML), any risk-return combination beyond the Market Portfolio (m) is obtained by ____.

Common stockholders require a higher rate of return than do holders of Aaa-rated bonds. This reflects which type of risk premium?

The term structure of interest rates is the pattern of interest rate yields for securities that differ only in ____.

In general, when the correlation coefficient between the returns on two securities is ____, the risk of a portfolio is ____ the weighted average of the total risk of the two individual securities.

The business risk of a firm refers to the ____.

Sally's broker told her that the expected return from her portfolio was 14.2%. If 40% of her securities have an expected return of 10.3% and 20% have an expected return of 12.8%, what is the expected return of the remaining portion of her portfolio?

Which of the following would be considered a risk-free investment?

Beta is defined as ____.

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

Continuous Compounding and Discounting

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Capital Budgeting and Cash Flow Analysis

Mutually Exclusive Investments Having Unequal Lives

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Breakeven Analysis

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-Term Financing

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate Term Financing

Financing With Derivatives

Bond Refunding Analysis

Risk Management

International Financial Management

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In general, when the correlation coefficient between the returns on two securities is , the risk of a portfolio is the weighted average of the total risk of the two individual securities.