Exam 12: Financial Return and Risk Concepts

Assume the probability of a pessimistic, most likely and optimistic state of nature is .25, .55 and .20, and the returns associated with those states of nature are 5%, 10%, and 13% for asset Y. Based on this information, the expected return, standard deviation, and coefficient of variation for asset Y are:

(Multiple Choice)

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Question 81

If a person requires greater return when risk increases, that person is said to be:

(Multiple Choice)

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Question 82

The correlation between the return on the risk-free asset with a constant return over time and the return on a risky asset is always:

(Multiple Choice)

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Question 83

According to the definitions given in the text, if Stock A has a standard deviation of 4% and Stock B has a standard deviation of 3% which stock is riskier?

(Multiple Choice)

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Question 84

Gold can have negative systematic risk.

(True/False)

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Question 85

Just because large company stocks have an arithmetic average return of about 11 percent does not mean we should expect the stock market to rise by that amount each year.

(True/False)

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Question 86

A higher coefficient of variation indicates more risk per unit of return.

(True/False)

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Question 87

The variance is the square root of the standard deviation.

(True/False)

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Question 88

Variations in operating income over time because of variations in unit sales, price, cost margins, and/or fixed expenses are called:

(Multiple Choice)

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Question 89

The sum of the deviations always equals the sample size n.

(True/False)

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Question 90

In computing the variance, you divide by the sample size n.

(True/False)

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Question 91

The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.

(True/False)

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Question 92

Most market risk can be eliminated through diversification.

(True/False)

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Question 93

The risk of a portfolio is simply equal to the weighted average variance of the securities that comprise it.

(True/False)

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Question 94

Purchasing power risk can be eliminated through diversification.

(True/False)

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Question 95

After controlling for risk, if someone were able to earn greater than the average returns for the market on a consistent basis using publicly available information, which form of market efficiency is violated?

(Multiple Choice)

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Question 96

Negative correlation is when asset returns are falling.

(True/False)

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Question 97

If standard deviation is used to measure the risk of stocks, one problem that arises is the inability to tell which stock is riskier by looking at the standard deviation alone.

(True/False)

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Question 98

Which one of the following assets has historically had the highest average annual return?

(Multiple Choice)

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Question 99

The market portfolio would have a beta of:

(Multiple Choice)

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Question 100

Showing 81 - 100 of 148

If a person requires greater return when risk increases, that person is said to be:

The correlation between the return on the risk-free asset with a constant return over time and the return on a risky asset is always:

According to the definitions given in the text, if Stock A has a standard deviation of 4% and Stock B has a standard deviation of 3% which stock is riskier?

Gold can have negative systematic risk.

Just because large company stocks have an arithmetic average return of about 11 percent does not mean we should expect the stock market to rise by that amount each year.

A higher coefficient of variation indicates more risk per unit of return.

The variance is the square root of the standard deviation.

Variations in operating income over time because of variations in unit sales, price, cost margins, and/or fixed expenses are called:

The sum of the deviations always equals the sample size n.

In computing the variance, you divide by the sample size n.

The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.

Most market risk can be eliminated through diversification.

The risk of a portfolio is simply equal to the weighted average variance of the securities that comprise it.

Purchasing power risk can be eliminated through diversification.

After controlling for risk, if someone were able to earn greater than the average returns for the market on a consistent basis using publicly available information, which form of market efficiency is violated?

Negative correlation is when asset returns are falling.

If standard deviation is used to measure the risk of stocks, one problem that arises is the inability to tell which stock is riskier by looking at the standard deviation alone.

Which one of the following assets has historically had the highest average annual return?

The market portfolio would have a beta of:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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