Exam 11: Introduction to Risk, Return, and the Opportunity Cost of Capital

Most of the beneficial effects of diversification will have been received by the time a portfolio of common stocks contains _____ stocks.

Which of the following statements is incorrect concerning stock indexes?

Which of the following risks would be classified as a unique risk for an auto manufacturer?

If a stock is purchased for $12.50 per share and held one year,during which time a $1.50 dividend is paid and the price drops to $10.75,the percentage return is:

The TSX 300 index is:

Stock market indexes are found in several countries outside the U.S.

An investor receives a 15 percent total return by purchasing a stock for $40 and selling it after one year with a 10 percent capital gain.How much was received in dividend income during the year?

Perhaps the best way to reduce macro risk in a stock portfolio is to invest in stocks that:

Risk factors that are expected to affect only a specific firm are referred to as:

Discuss the relationship between risk and return.

In general,which stocks should be combined in a portfolio,if the goal is to reduce overall risk?

Long-term corporate bonds are the only portfolio of securities found to be riskier than common stocks.

The appropriate opportunity cost of capital is the return that investors give up on alternative investments with:

Contrast the U.S.Dow Jones Industrial Average and the Standard & Poor's Composite Index on the issue of representativeness.

What nominal return was received by an investor when inflation averaged 8.0 percent and the real rate of return was a negative 2.5 percent?

What is the expected return on a portfolio that will decline in value by 13 percent in a recession,will increase by 16 percent in normal times,and will increase by 23 percent during boom times if each scenario has equal likelihood?

What is the variance of return of a three-stock portfolio (with unequal weights 25%,50% and 25%)that produced returns of 20%,25% and 30%,respectively?

What is the approximate variance of returns if over the past three years an investment returned 8.0 percent,-12.0 percent,and 15.0 percent?

A stock investor owns a diversified portfolio of 15 stocks.What will be the likely effect on portfolio standard deviation from adding one more stock?

If the standard deviation of a portfolio's returns is known to be 30 percent,then its variance is: