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

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.

$\begin{array}{c} \begin{array}{c} \underline{\text { Year }} \\ 1 \\ 2 \\ 3 \\ 4 \end{array} \begin{array}{c} \underline{\text {Stock X}}\\ -27 \% \\ 6 \% \\ 34 \%\\ 11\% \end{array} \begin{array}{c} \underline{\text { Market } }\\ -7 \% \\ 11 \% \\ 18 \% \\ 10\% \end{array} \end{array}$ -What is the covariance between Stock X and the market?

A) 0.0125 B) 0.0262 C) 0.0468 D) 0.0429 E) 0.0316 A) 0.0125 B) 0.0262 C) 0.0468 D) 0.0429 E) 0.0316

$\begin{array}{lrcc} & \text { Amount invested } & \text { Expected return } & \text { Beta } \\ \text { Stock X } & \$ 30,000 & 16 \% & 1.35 \\ \text { Stock Y } & \$ 45,000 & 13 \% & 1.10 \\ \text { Stock Z } & \$ 25,000 & 10 \% & 0.85 \end{array}$ -What is the expected return of the portfolio?

A) 14.60% B) 14.05% C) 13.68% D) 13.15% E) 12.85% A) 14.60% B) 14.05% C) 13.68% D) 13.15% E) 12.85%

Exam 12: Return, Risk and Security Management

The theory that states the value of a security depends on the time value of money, the reward for bearing systematic risk, and the amount of systematic risk is called the:

(Multiple Choice)

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Question 81

Stocks X, Y and Z have reward-to-risk ratios of 6.4, 6.9 and 7.3, respectively. Given an efficient market, you know that:

(Multiple Choice)

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Question 82

The sensitivity of a stock's return to movements in the market is dependent upon I) the value of the reward-to-risk ratio II. the volatility of the stock in relation to the market III. the correlation of the stock's return to that of the market IV. the expected return of the stock

(Multiple Choice)

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Question 83

The risk-free rate is 4.6% and the expected return on the market is 10.5%. Stock A has a beat of 1.2. For a given year, Stock A returned 15.9% while the market returned 13.8%. The systematic portion of the return was _ and the unsystematic portion was _.

(Multiple Choice)

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Question 84

The current risk-free rate is 6.2 percent. A stock has an expected return if 10.8 percent and a beta of 0.90. What is the market risk premium?

(Multiple Choice)

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Question 85

Explain the primary goal of portfolio diversification as it relates to asset allocation and correlation.

(Essay)

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Question 86

Which of the following stocks has the greatest total risk? 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 87

According to the CAPM, the expected return on a risky asset depends on three factors. List each factor, how each factor is measured and explain its role in determining the expected return.

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Question 88

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 a beta of 0.85, what is the weight of the stock?

(Multiple Choice)

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Question 89

The risk-free rate is 5.4% and the expected return on the market is 11.2%. Stock A has a beat of 1.3. For a given year, Stock A returned 14.8% while the market returned 12.7%. The systematic portion of the return was and the unsystematic portion was _.

(Multiple Choice)

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Question 90

1 2 3 4 -27\% 6\% 34\% 11\% -7\% 11\% 18\% 10\% -What is the covariance between Stock X and the market?

(Multiple Choice)

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Question 91

To combine the risk-free asset with the efficient frontier, we have the

(Multiple Choice)

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Question 92

The expected return of the market is 12.90 percent. A stock has an expected return of 14.90 percent and a beta of 1.25. What is the risk-free rate?

(Multiple Choice)

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Question 93

You own a portfolio equally invested in the risk-free asset and two stocks. One of the stocks has a beta of 1.30 and the beta of your portfolio is 0.90. What is the beta of the other stock?

(Multiple Choice)

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Question 94

The cost associated with diversification is:

(Multiple Choice)

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Question 95

Explain what beta is and why it is important.

(Essay)

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Question 96

Your friend is considering investing in portfolio which they expect will generate a return of 14% and has a beta of 1.3. You know that historic expected return for the stock market is 12% and Government of Canada 90-Day treasury bills are currently yielding 1.0%. Explain to your friend why his potential investment is "inefficient".

(Essay)

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Question 97

Based on CAPM, the expected return on a stock is affected by the

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Question 98

Amount invested Expected return Beta Stock X \ 30,000 16\% 1.35 Stock Y \ 45,000 13\% 1.10 Stock Z \ 25,000 10\% 0.85 -What is the expected return of the portfolio?

(Multiple Choice)

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Question 99

Which of the following is considered a systematic risk?

(Multiple Choice)

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Question 100

The theory that states the value of a security depends on the time value of money, the reward for bearing systematic risk, and the amount of systematic risk is called the:

Stocks X, Y and Z have reward-to-risk ratios of 6.4, 6.9 and 7.3, respectively. Given an efficient market, you know that:

The sensitivity of a stock's return to movements in the market is dependent upon I) the value of the reward-to-risk ratio II. the volatility of the stock in relation to the market III. the correlation of the stock's return to that of the market IV. the expected return of the stock

The risk-free rate is 4.6% and the expected return on the market is 10.5%. Stock A has a beat of 1.2. For a given year, Stock A returned 15.9% while the market returned 13.8%. The systematic portion of the return was _ and the unsystematic portion was _.

The current risk-free rate is 6.2 percent. A stock has an expected return if 10.8 percent and a beta of 0.90. What is the market risk premium?

Explain the primary goal of portfolio diversification as it relates to asset allocation and correlation.

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

According to the CAPM, the expected return on a risky asset depends on three factors. List each factor, how each factor is measured and explain its role in determining the expected return.

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 a beta of 0.85, what is the weight of the stock?

The risk-free rate is 5.4% and the expected return on the market is 11.2%. Stock A has a beat of 1.3. For a given year, Stock A returned 14.8% while the market returned 12.7%. The systematic portion of the return was and the unsystematic portion was _.

1 2 3 4 -27\% 6\% 34\% 11\% -7\% 11\% 18\% 10\% -What is the covariance between Stock X and the market?

To combine the risk-free asset with the efficient frontier, we have the

The expected return of the market is 12.90 percent. A stock has an expected return of 14.90 percent and a beta of 1.25. What is the risk-free rate?

You own a portfolio equally invested in the risk-free asset and two stocks. One of the stocks has a beta of 1.30 and the beta of your portfolio is 0.90. What is the beta of the other stock?

The cost associated with diversification is:

Explain what beta is and why it is important.

Based on CAPM, the expected return on a stock is affected by the

Amount invested Expected return Beta Stock X \ 30,000 16\% 1.35 Stock Y \ 45,000 13\% 1.10 Stock Z \ 25,000 10\% 0.85 -What is the expected return of the portfolio?

Which of the following is considered a systematic risk?

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

The theory that states the value of a security depends on the time value of money, the reward for bearing systematic risk, and the amount of systematic risk is called the:

Stocks X, Y and Z have reward-to-risk ratios of 6.4, 6.9 and 7.3, respectively. Given an efficient market, you know that:

The sensitivity of a stock's return to movements in the market is dependent upon I) the value of the reward-to-risk ratio II. the volatility of the stock in relation to the market III. the correlation of the stock's return to that of the market IV. the expected return of the stock

The risk-free rate is 4.6% and the expected return on the market is 10.5%. Stock A has a beat of 1.2. For a given year, Stock A returned 15.9% while the market returned 13.8%. The systematic portion of the return was _________ and the unsystematic portion was _________.

The current risk-free rate is 6.2 percent. A stock has an expected return if 10.8 percent and a beta of 0.90. What is the market risk premium?

Explain the primary goal of portfolio diversification as it relates to asset allocation and correlation.

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

According to the CAPM, the expected return on a risky asset depends on three factors. List each factor, how each factor is measured and explain its role in determining the expected return.

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 a beta of 0.85, what is the weight of the stock?

The risk-free rate is 5.4% and the expected return on the market is 11.2%. Stock A has a beat of 1.3. For a given year, Stock A returned 14.8% while the market returned 12.7%. The systematic portion of the return was ________ and the unsystematic portion was _________.

1 2 3 4 -27\% 6\% 34\% 11\% -7\% 11\% 18\% 10\% -What is the covariance between Stock X and the market?

To combine the risk-free asset with the efficient frontier, we have the

The expected return of the market is 12.90 percent. A stock has an expected return of 14.90 percent and a beta of 1.25. What is the risk-free rate?

You own a portfolio equally invested in the risk-free asset and two stocks. One of the stocks has a beta of 1.30 and the beta of your portfolio is 0.90. What is the beta of the other stock?

The cost associated with diversification is:

Explain what beta is and why it is important.

Based on CAPM, the expected return on a stock is affected by the

Amount invested Expected return Beta Stock X \ 30,000 16\% 1.35 Stock Y \ 45,000 13\% 1.10 Stock Z \ 25,000 10\% 0.85 -What is the expected return of the portfolio?

Which of the following is considered a systematic risk?

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 risk-free rate is 4.6% and the expected return on the market is 10.5%. Stock A has a beat of 1.2. For a given year, Stock A returned 15.9% while the market returned 13.8%. The systematic portion of the return was _ and the unsystematic portion was _.

The risk-free rate is 5.4% and the expected return on the market is 11.2%. Stock A has a beat of 1.3. For a given year, Stock A returned 14.8% while the market returned 12.7%. The systematic portion of the return was and the unsystematic portion was _.