Question 1

You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return?

Accepted Answer

A) 6.49 percent 
B) 8.64 percent 
C) 8.87 percent 
D) 9.05 percent 
E) 9.23 percent 
A) 6.49 percent 
B) 8.64 percent 
C) 8.87 percent 
D) 9.05 percent 
E) 9.23 percent

Question 2

What is the standard deviation of the returns on a portfolio that is invested in stocks A, B, and C? Twenty five percent of the portfolio is invested in stock A and 40 percent is invested in stock C.

Accepted Answer

A) 6.31 percent 
B) 6.49 percent 
C) 7.40 percent 
D)  7.83 percent 
E) 8.72 percent 
A) 6.31 percent 
B) 6.49 percent 
C) 7.40 percent 
D)  7.83 percent 
E) 8.72 percent

Question 3

Which one of the following is an example of unsystematic risk?

Accepted Answer

A) income taxes are increased across the board 
B) a national sales tax is adopted 
C) inflation decreases at the national level 
D) an increased feeling of prosperity is felt around the globe 
E) consumer spending on entertainment decreased nationally 
A) income taxes are increased across the board 
B) a national sales tax is adopted 
C) inflation decreases at the national level 
D) an increased feeling of prosperity is felt around the globe 
E) consumer spending on entertainment decreased nationally

Question 4

According to CAPM, the amount of reward an investor receives for bearing the risk of an individual security depends upon the:

Accepted Answer

A) amount of total risk assumed and the market risk premium. 
B) market risk premium and the amount of systematic risk inherent in the security. 
C) risk free rate, the market rate of return, and the standard deviation of the security. 
D) beta of the security and the market rate of return. 
E) standard deviation of the security and the risk-free rate of return. 
A) amount of total risk assumed and the market risk premium. 
B) market risk premium and the amount of systematic risk inherent in the security. 
C) risk free rate, the market rate of return, and the standard deviation of the security. 
D) beta of the security and the market rate of return. 
E) standard deviation of the security and the risk-free rate of return.

Question 5

Which one of the following is a positively sloped linear function that is created when expected returns are graphed against security betas?

Accepted Answer

A) reward-to-risk matrix 
B) portfolio weight graph 
C) normal distribution 
D) security market line 
E) market real returns 
A) reward-to-risk matrix 
B) portfolio weight graph 
C) normal distribution 
D) security market line 
E) market real returns

Question 6

A stock has a beta of 1.2 and an expected return of 17 percent. A risk-free asset currently earns 5.1 percent. The beta of a portfolio comprised of these two assets is 0.85. What percentage of the portfolio is invested in the stock?

Accepted Answer

A) 71 percent 
B) 77 percent 
C) 84 percent 
D) 89 percent 
E) 92 percent 
A) 71 percent 
B) 77 percent 
C) 84 percent 
D) 89 percent 
E) 92 percent

Question 7

Which one of the following is the formula that explains the relationship between the expected return on a security and the level of that security's systematic risk?

Accepted Answer

A) capital asset pricing model 
B) time value of money equation 
C) unsystematic risk equation 
D) market performance equation 
E) expected risk formula 
A) capital asset pricing model 
B) time value of money equation 
C) unsystematic risk equation 
D) market performance equation 
E) expected risk formula

Question 8

What is the variance of the returns on a portfolio comprised of $5,400 of stock G and $6,600 of stock H?

Accepted Answer

A) .000709 
B) .000848 
C) .001097 
D) .001254 
E) .001468 
A) .000709 
B) .000848 
C) .001097 
D) .001254 
E) .001468

You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return?

What is the standard deviation of the returns on a portfolio that is invested in stocks A, B, and C? Twenty five percent of the portfolio is invested in stock A and 40 percent is invested in stock C.

Which one of the following is an example of unsystematic risk?

According to CAPM, the amount of reward an investor receives for bearing the risk of an individual security depends upon the:

Which one of the following is a positively sloped linear function that is created when expected returns are graphed against security betas?

A stock has a beta of 1.2 and an expected return of 17 percent. A risk-free asset currently earns 5.1 percent. The beta of a portfolio comprised of these two assets is 0.85. What percentage of the portfolio is invested in the stock?

Which one of the following is the formula that explains the relationship between the expected return on a security and the level of that security's systematic risk?

What is the variance of the returns on a portfolio comprised of $5,400 of stock G and $6,600 of stock H?

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Dividend Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Risk Management: An Introduction to Financial Engineering

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters

Exam 13: Return, Risk, and the Security Market Line

You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return?

What is the standard deviation of the returns on a portfolio that is invested in stocks A, B, and C? Twenty five percent of the portfolio is invested in stock A and 40 percent is invested in stock C.

Which one of the following is an example of unsystematic risk?

According to CAPM, the amount of reward an investor receives for bearing the risk of an individual security depends upon the:

Which one of the following is a positively sloped linear function that is created when expected returns are graphed against security betas?

A stock has a beta of 1.2 and an expected return of 17 percent. A risk-free asset currently earns 5.1 percent. The beta of a portfolio comprised of these two assets is 0.85. What percentage of the portfolio is invested in the stock?

Which one of the following is the formula that explains the relationship between the expected return on a security and the level of that security's systematic risk?

What is the variance of the returns on a portfolio comprised of $5,400 of stock G and $6,600 of stock H?

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Dividend Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Risk Management: An Introduction to Financial Engineering

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters