\(\begin{array}{llcc} \text {Expected return on the market } &13\% \\ \text { Standard deviation of the market } &21\%\\ \text { Risk-free rate} &5.5\%\\ \text { Correlation coefficient between }&\\ \text { Stock A and the market } & 0.65 \\ \text { Stock B and the market } & 0.28 \\ \text { Standard deviation of Stock A } & 64 \% \\ \text { Standard deviation of Stock B } & 53 \% \end{array}\) -What is the beta of Stock A?

A) 1.47 B) 1.98 C) 1.51 D) 1.69 E) 1.82 A) 1.47 B) 1.98 C) 1.51 D) 1.69 E) 1.82

\(\begin{array}{c} \begin{array}{c} \underline{\text { Year }} \\ 1 \\ 2 \\ 3 \end{array} \begin{array}{c} \underline{\text {Stock A}}\\ 26 \% \\ -19 \% \\ 14 \% \end{array} \begin{array}{c} \underline{\text { Market } }\\ 12 \% \\ -2 \% \\ 5 \% \end{array} \end{array}\) -What is the covariance between Stock A and the market?

A) 0.0324 B) 0.0256 C) 0.0469 D) 0.0158 E) 0.0378 A) 0.0324 B) 0.0256 C) 0.0469 D) 0.0158 E) 0.0378

Which of the following stocks has the greatest expected return? \(\begin{array}{c} \begin{array}{lll} \\ \text { Stock A}\\ \text { Stock B}\\ \text { Stock C}\\ \text { Stock D} \end{array} \begin{array}{c} \text {Standard deviation}\\ 62 \% \\ 47 \% \\ 53 \% \\ 59 \% \% \end{array} \begin{array}{lll} \text {Beta}\\ 1.10 \\ 1.05 \\ 1.30 \\ 0.90 \end{array} \end{array}\)

A) Stock A B) Stock B C) Stock C D) Stock D E) Insufficient information. A) Stock A B) Stock B C) Stock C D) Stock D E) Insufficient information.

\(\begin{array}{llcc} \text {Expected return on the market } &13\% \\ \text { Standard deviation of the market } &21\%\\ \text { Risk-free rate} &5.5\%\\ \text { Correlation coefficient between }&\\ \text { Stock A and the market } & 0.65 \\ \text { Stock B and the market } & 0.28 \\ \text { Standard deviation of Stock A } & 64 \% \\ \text { Standard deviation of Stock B } & 53 \% \end{array}\) -What is the expected return of Stock A?

A) 18.21% B) 16.43% C) 19.27% D) 20.35% E) 18.68% A) 18.21% B) 16.43% C) 19.27% D) 20.35% E) 18.68%

Exam 12: Return, Risk and Security Management

A stock has a beta of 1.30 and an expected return of 16 percent. The risk-free rate is 5 percent. If a portfolio of the two assets has an expected return of 13 percent, what is the beta of the portfolio?

(Multiple Choice)

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Question 41

The upper limit of covariance is , and the lower limit of covariance is .

(Multiple Choice)

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Question 42

Expected return on the market 13\% Standard deviation of the market 21\% Risk-free rate 5.5\% Correlation coefficient between Stock A and the market 0.65 Stock B and the market 0.28 Standard deviation of Stock A 64\% Standard deviation of Stock B 53\% -What is the beta of Stock A?

(Multiple Choice)

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Question 43

Which of the following will be needed to compute the beta of an individual security? I. Average return on the market for the period II. Standard deviation of the security and the market III. Return on the security and the market by time period for a specified period of time IV. Correlation of the security to the market

(Multiple Choice)

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Question 44

__________ is a theory where the price of an asset depends on multiple factors and arbitrage efficiency prevails.

(Multiple Choice)

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Question 45

Research conducted by Fama and French appear to indicate that over long periods of time, rates of return tend to be higher when

(Multiple Choice)

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Question 46

1 2 3 26\% -19\% 14\% 12\% -2\% 5\% -What is the covariance between Stock A and the market?

(Multiple Choice)

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Question 47

The level of systematic risk inherent in an asset is measured by

(Multiple Choice)

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Question 48

The unexpected return of an asset is the:

(Multiple Choice)

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Question 49

The expected return of a stock is 13 percent, and its beta is 1.08. If the risk-free rate is 5.5 percent and the stock is correctly priced, what is the slope of the security market line?

(Multiple Choice)

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Question 50

The total risk of a stock is a combination of risk and risk.

(Multiple Choice)

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Question 51

Systematic risk is important because:

(Multiple Choice)

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Question 52

Which of the following stocks has the greatest expected return? Stock A Stock B Stock C Stock D Standard deviation 62\% 47\% 53\% 59\%\% Beta 1.10 1.05 1.30 0.90

(Multiple Choice)

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Question 53

Validity of the CAPM depends on

(Multiple Choice)

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Question 54

You realized a total return of 14.6% that is less than your expected return of 15.5%. What is the amount of your unexpected return?

(Multiple Choice)

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Question 55

A diversified portfolio has almost no _________ risk.

(Multiple Choice)

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Question 56

An asset has a covariance of 0.918 with the market. The asset's returns have a __________ relationship with the market returns.

(Multiple Choice)

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Question 57

Expected return on the market 13\% Standard deviation of the market 21\% Risk-free rate 5.5\% Correlation coefficient between Stock A and the market 0.65 Stock B and the market 0.28 Standard deviation of Stock A 64\% Standard deviation of Stock B 53\% -What is the expected return of Stock A?

(Multiple Choice)

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Question 58

The reward for bearing risk is known as the:

(Multiple Choice)

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Question 59

A stock has a covariance of 0.0834 with the market. The standard deviation of the stock is 48 percent, and the standard deviation of the market is 26 percent. What is the beta of the stock?

(Multiple Choice)

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Question 60

A stock has a beta of 1.30 and an expected return of 16 percent. The risk-free rate is 5 percent. If a portfolio of the two assets has an expected return of 13 percent, what is the beta of the portfolio?

The upper limit of covariance is , and the lower limit of covariance is .

Expected return on the market 13\% Standard deviation of the market 21\% Risk-free rate 5.5\% Correlation coefficient between Stock A and the market 0.65 Stock B and the market 0.28 Standard deviation of Stock A 64\% Standard deviation of Stock B 53\% -What is the beta of Stock A?

__________ is a theory where the price of an asset depends on multiple factors and arbitrage efficiency prevails.

Research conducted by Fama and French appear to indicate that over long periods of time, rates of return tend to be higher when

1 2 3 26\% -19\% 14\% 12\% -2\% 5\% -What is the covariance between Stock A and the market?

The level of systematic risk inherent in an asset is measured by

The unexpected return of an asset is the:

The expected return of a stock is 13 percent, and its beta is 1.08. If the risk-free rate is 5.5 percent and the stock is correctly priced, what is the slope of the security market line?

The total risk of a stock is a combination of risk and risk.

Systematic risk is important because:

Which of the following stocks has the greatest expected return? Stock A Stock B Stock C Stock D Standard deviation 62\% 47\% 53\% 59\%\% Beta 1.10 1.05 1.30 0.90

Validity of the CAPM depends on

You realized a total return of 14.6% that is less than your expected return of 15.5%. What is the amount of your unexpected return?

A diversified portfolio has almost no _________ risk.

An asset has a covariance of 0.918 with the market. The asset's returns have a __________ relationship with the market returns.

Expected return on the market 13\% Standard deviation of the market 21\% Risk-free rate 5.5\% Correlation coefficient between Stock A and the market 0.65 Stock B and the market 0.28 Standard deviation of Stock A 64\% Standard deviation of Stock B 53\% -What is the expected return of Stock A?

The reward for bearing risk is known as the:

A stock has a covariance of 0.0834 with the market. The standard deviation of the stock is 48 percent, and the standard deviation of the market is 26 percent. What is the beta of the stock?

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

Exam 12: Return, Risk and Security Management

A stock has a beta of 1.30 and an expected return of 16 percent. The risk-free rate is 5 percent. If a portfolio of the two assets has an expected return of 13 percent, what is the beta of the portfolio?

The upper limit of covariance is __________, and the lower limit of covariance is __________.

Expected return on the market 13\% Standard deviation of the market 21\% Risk-free rate 5.5\% Correlation coefficient between Stock A and the market 0.65 Stock B and the market 0.28 Standard deviation of Stock A 64\% Standard deviation of Stock B 53\% -What is the beta of Stock A?

__________ is a theory where the price of an asset depends on multiple factors and arbitrage efficiency prevails.

Research conducted by Fama and French appear to indicate that over long periods of time, rates of return tend to be higher when

1 2 3 26\% -19\% 14\% 12\% -2\% 5\% -What is the covariance between Stock A and the market?

The level of systematic risk inherent in an asset is measured by

The unexpected return of an asset is the:

The expected return of a stock is 13 percent, and its beta is 1.08. If the risk-free rate is 5.5 percent and the stock is correctly priced, what is the slope of the security market line?

The total risk of a stock is a combination of __________ risk and __________ risk.

Systematic risk is important because:

Which of the following stocks has the greatest expected return? Stock A Stock B Stock C Stock D Standard deviation 62\% 47\% 53\% 59\%\% Beta 1.10 1.05 1.30 0.90

Validity of the CAPM depends on

You realized a total return of 14.6% that is less than your expected return of 15.5%. What is the amount of your unexpected return?

A diversified portfolio has almost no _________ risk.

An asset has a covariance of 0.918 with the market. The asset's returns have a __________ relationship with the market returns.

Expected return on the market 13\% Standard deviation of the market 21\% Risk-free rate 5.5\% Correlation coefficient between Stock A and the market 0.65 Stock B and the market 0.28 Standard deviation of Stock A 64\% Standard deviation of Stock B 53\% -What is the expected return of Stock A?

The reward for bearing risk is known as the:

A stock has a covariance of 0.0834 with the market. The standard deviation of the stock is 48 percent, and the standard deviation of the market is 26 percent. What is the beta of the stock?

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

The upper limit of covariance is , and the lower limit of covariance is .

The total risk of a stock is a combination of risk and risk.