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

A stock investor owns a diversified portfolio of 15 stocks.What will be the most likely effect on the portfolio's standard deviation if one more stock is added?

The Dow Jones Industrial Average is:

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?

If one portfolio's variance exceeds that of another portfolio,its standard deviation will also be greater than that of the other portfolio.

When using historical data to estimate the market risk premium,it is important to focus on recent experience.

The primary difference between U.S.Treasury bills and U.S.Treasury bonds is that the bills:

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

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 historical record fails to show that investors have received a risk premium for holding risky assets.

Risks that are peculiar to a single firm:

A stock is expected to return 11% in a normal economy,19% if the economy booms,and lose 8% if the economy moves into a recessionary period.Economists predict a 65% chance of a normal economy,a 25% chance of a boom,and a 10% chance of a recession.What is the expected return on the stock?

Historical returns (1900-2015)suggest that in a year when Treasury bills offered 7.5 the approximate return on portfolio of common stocks should be in the region of:

Market risk can be eliminated in a stock portfolio through diversification.

The idea that investors on average have earned a higher return from common stocks than from Treasury bills supports the view that:

Stock A has 10 million shares outstanding and stock B has 5 million shares outstanding.Both stocks sell for $10 a share.What is their relative weighting if both stocks are represented in the S&P 500?

What is the standard deviation of returns for an investment that is equally likely to return 100% as it is to provide a 100% loss?

Which one of these is a specific risk?

Calculate the variance of returns for Alpha stock with the following historical rates of return: 2013 20% 2014 25% 2015 30%

Individual stocks are:

Which one of the following firms is likely to exhibit the least macro risk exposure?