Question 1

Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:

Accepted Answer

A)  -1.0 
B)  +1.0 
C)  0.0 
D)  none of the above 
A)  -1.0 
B)  +1.0 
C)  0.0 
D)  none of the above

Question 2

An asset's beta can be estimated by regressing its returns against the returns for the market portfolio.

Accepted Answer

A) True 
 B)False

Question 3

The variance of a portfolio is a weighted average of its asset variances.

Accepted Answer

A) True 
 B)False

Question 4

The standard deviation is computed first and then squared to find the variance.

Accepted Answer

A) True 
 B)False

Question 5

Diversification occurs when we invest in several different assets rather than just a single one.

Accepted Answer

A) True 
 B)False

Question 6

If one were to rank different assets from highest to lowest the basis of average historical return, the ranking would be:

Accepted Answer

A)  long-term corporate bonds, large company stocks, long term government bonds, US Treasury bills 
B)  large company stocks, long-term corporate bonds, long term government bonds, US Treasury bills 
C)  US Treasury bills, long term government bonds, long term corporate bonds, large company stocks 
D)  US Treasury bills, long term corporate bonds, long term government bonds, large company stocks 
A)  long-term corporate bonds, large company stocks, long term government bonds, US Treasury bills 
B)  large company stocks, long-term corporate bonds, long term government bonds, US Treasury bills 
C)  US Treasury bills, long term government bonds, long term corporate bonds, large company stocks 
D)  US Treasury bills, long term corporate bonds, long term government bonds, large company stocks

Question 7

Which of the following statements is most correct?

Accepted Answer

A)  The probability of an event occurring is one half the percentage of a given outcome. 
B)  A continuous probability distribution shows all possible outcomes and associated probabilities for a given event. 
C)  The standard deviation measures the dispersion around the variance. 
D)  The coefficient of variation is a measure of relative dispersion used in comparing the risk of assets with the same expected returns. 
A)  The probability of an event occurring is one half the percentage of a given outcome. 
B)  A continuous probability distribution shows all possible outcomes and associated probabilities for a given event. 
C)  The standard deviation measures the dispersion around the variance. 
D)  The coefficient of variation is a measure of relative dispersion used in comparing the risk of assets with the same expected returns.

Question 8

Research suggests that a portfolio of 20 or 30 different stocks can eliminate most of a portfolio's systematic risk.

Accepted Answer

A) True 
 B)False

Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:

An asset's beta can be estimated by regressing its returns against the returns for the market portfolio.

The variance of a portfolio is a weighted average of its asset variances.

The standard deviation is computed first and then squared to find the variance.

Diversification occurs when we invest in several different assets rather than just a single one.

If one were to rank different assets from highest to lowest the basis of average historical return, the ranking would be:

Which of the following statements is most correct?

Research suggests that a portfolio of 20 or 30 different stocks can eliminate most of a portfolio's systematic risk.

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

Filters

Exam 12: Financial Return and Risk Concepts

Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:

An asset's beta can be estimated by regressing its returns against the returns for the market portfolio.

The variance of a portfolio is a weighted average of its asset variances.

The standard deviation is computed first and then squared to find the variance.

Diversification occurs when we invest in several different assets rather than just a single one.

If one were to rank different assets from highest to lowest the basis of average historical return, the ranking would be:

Which of the following statements is most correct?

Research suggests that a portfolio of 20 or 30 different stocks can eliminate most of a portfolio's systematic risk.

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

Filters