Question 1

Market risk is:

Accepted Answer

A)  The risk that remains in a well-diversified portfolio. 
B)  Also called systematic risk. 
C)  Nondiversifiable. 
D)  The risk that affects all securities. 
E)  All of the above. 
A)  The risk that remains in a well-diversified portfolio. 
B)  Also called systematic risk. 
C)  Nondiversifiable. 
D)  The risk that affects all securities. 
E)  All of the above.

Question 2

The lower the correlation between assets:

Accepted Answer

A)  The lower the portfolio variance. 
B)  The higher the expected return for a given level of risk. 
C)  The greater the diversification benefits. 
D)  a and b only. 
E)  All of the above. 
A)  The lower the portfolio variance. 
B)  The higher the expected return for a given level of risk. 
C)  The greater the diversification benefits. 
D)  a and b only. 
E)  All of the above.

Question 3

Historical return distributions for a portfolio of a large number of securities have shown that the distribution is:

Accepted Answer

A)  Perfect. 
B)  Symmetric. 
C)  Asymmetric. 
D)  Skewed. 
E)  None of the above. 
A)  Perfect. 
B)  Symmetric. 
C)  Asymmetric. 
D)  Skewed. 
E)  None of the above.

Question 4

Studies of common stock returns have shown that total portfolio risk declines:

Accepted Answer

A)  As the number of security holdings increases. 
B)  Security returns are less than perfectly correlated. 
C)  As diversification increases. 
D)  All of the above. 
E)  None of the above. 
A)  As the number of security holdings increases. 
B)  Security returns are less than perfectly correlated. 
C)  As diversification increases. 
D)  All of the above. 
E)  None of the above.

Question 5

Discuss the impact of diversification on total risk.

Accepted Answer

a. Standard deviation as a mea

Question 6

Systematic risk is:

Accepted Answer

A)  The risk that can be eliminated through diversification. 
B)  The risk that affects all securities. 
C)  The total risk of a well-diversified portfolio. 
D)  The risk that cannot be diversified by portfolio combination. 
E)  b and d only. 
A)  The risk that can be eliminated through diversification. 
B)  The risk that affects all securities. 
C)  The total risk of a well-diversified portfolio. 
D)  The risk that cannot be diversified by portfolio combination. 
E)  b and d only.

Market risk is:

The lower the correlation between assets:

Historical return distributions for a portfolio of a large number of securities have shown that the distribution is:

Studies of common stock returns have shown that total portfolio risk declines:

Discuss the impact of diversification on total risk.

Systematic risk is:

Introduction

Overview of Market Participants and Financial Innovation

Depository Institutions

Insurance Companies

Asset Management Firms

Investment Banking Firms

Primary and Secondary Markets

Risk and Return Theories: II

Introduction to Financial Futures Markets

Introduction to Options Markets

Introduction to the Swaps, Caps, and Floors Markets

Common Stock Market: I

Common Stock Market: II

Stock Options Market

The Market for Stock Index Products and Other Equity Derivatives

The Theory and Structure of Interest Rates

Valuation of Debt Contracts and Their Price Volatility Characteristics

The Term Structure of Interest Rates

Money Markets

Treasury and Agency Securities Markets

Corporate Senior Instruments Markets: I

Corporate Senior Instruments Markets: II

Municipal Securities Markets

The Residential Mortgage Market

The Market for Residential Mortgage-Backed Securities

Market for Asset-Backed Securities

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

International Bond Markets

International Bond Markets

Market for Interest Rate Risk Transfer Vehicles: OTC Instruments

The Market for Foreign Exchange and Risk Control Instruments

Filters

Exam 8: Risk and Return Theories: I

Market risk is:

The lower the correlation between assets:

Historical return distributions for a portfolio of a large number of securities have shown that the distribution is:

Studies of common stock returns have shown that total portfolio risk declines:

Discuss the impact of diversification on total risk.

Systematic risk is:

Introduction

Overview of Market Participants and Financial Innovation

Depository Institutions

Insurance Companies

Asset Management Firms

Investment Banking Firms

Primary and Secondary Markets

Risk and Return Theories: II

Introduction to Financial Futures Markets

Introduction to Options Markets

Introduction to the Swaps, Caps, and Floors Markets

Common Stock Market: I

Common Stock Market: II

Stock Options Market

The Market for Stock Index Products and Other Equity Derivatives

The Theory and Structure of Interest Rates

Valuation of Debt Contracts and Their Price Volatility Characteristics

The Term Structure of Interest Rates

Money Markets

Treasury and Agency Securities Markets

Corporate Senior Instruments Markets: I

Corporate Senior Instruments Markets: II

Municipal Securities Markets

The Residential Mortgage Market

The Market for Residential Mortgage-Backed Securities

Market for Asset-Backed Securities

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

International Bond Markets

International Bond Markets

Market for Interest Rate Risk Transfer Vehicles: OTC Instruments

The Market for Foreign Exchange and Risk Control Instruments

Filters