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

The incremental risk to a portfolio from adding another stock:

When viewing the long-term trend of the price volatility of U.S. stocks, it is readily apparent that volatility has:

If a stock's returns are volatile, then the stock:

Specific risks are generally associated with a single firm or industry.

If a share of stock provided a 14.84% nominal rate of return over the previous year while the real rate of return was 6.65%, then the inflation rate was:

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

An investor receives a 15% total return by purchasing a stock for $40 and selling it after one year with a 5% capital gain. How much was received in dividend income during the year?

Discuss the concept of a "negative risk asset."

Which one of these is a specific risk?

From a historical perspective (1900-2013), what would you expect to be the approximate return on a diversified portfolio of common stocks in a year that Treasury bills offered 7.5%?

Real rates of return are typically less than nominal rates of return due to:

What is the variance of returns of a 3-stock portfolio (each stock being equally weighted) that produced returns of 20%, 25%, and 30%?

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

Which one of the following statements is incorrect concerning stock indexes?

Calculate the nominal return, real return, nominal risk premium, and real risk premium for the following common stock investment: (Show your work)