Exam 12: Return, Risk, and the Security Market Line

The risk-free rate is 5.1 percent, the market rate is 13.3 percent, and the expected return on a stock is 15.84 percent. What is the beta of the stock?

Brooke invested $3,500 in the stock market with the expectation of earning 9.5 percent. She actually earned 10.7 percent for the year. What is the amount of her unexpected return?

Identify and describe each of the three components of a security's expected return according to the capital asset pricing model.

A portfolio of securities has a beta of 1.14. Given this, you know that:

The risk-free rate is 3.4 percent and the expected return on the market is 10.8 percent. Stock A has a beta of 1.18. For a given year, stock A returned 13.6 percent while the market returned 11.8 percent. The systematic portion of the unexpected return was _____ percent and the unsystematic portion was _____ percent.

Phil realized a total return of 13.2 percent which is less than his expected return of 14.4 percent. What is the amount of his unexpected return?

Laura has one risk-free asset and one risky stock in her portfolio. The risk-free asset has an expected return of 3.2 percent. The risky asset has a beta of 1.3 and an expected return of 14.9 percent. What is the expected return on the portfolio if the portfolio beta is .975?

The following portfolio has an expected return of _____ percent and a beta of _____.

The amount of risk premium allocated to Security A is dependent upon which one of the following?

Which one of the following is the type of risk that affects a large number of assets?

Which one of the following stocks has the highest expected risk premium?

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

A portfolio consists of two stocks and has a beta of 1.07. The first stock has a beta of 1.48 and comprises 38 percent of the portfolio. What is the beta of the second stock?

A risky asset has a beta of .88 and an expected return of 7.4 percent. What is the reward-to-risk ratio if the risk-free rate is 2.8 percent?

The risk-free rate is 3.1 percent and the expected return on the market is 11 percent. Stock A has a beta of 1.34. For a given year, Stock A returned 16.7 percent while the market returned 12.2 percent. The systematic portion of Stock A's unexpected return was _____ percent and the unsystematic portion was _____ percent.

What is the beta of a risk-free security?

The security market line depicts the graphical relationship between which two of the following? I. expected return II. surprise return III. systematic risk IV. unsystematic risk

Retail Specialties just announced that its Chief Operating Officer is retiring at the end of this month. This announcement will cause the firm's stock price to:

Of the following, Stock _____ has the greatest level of total risk and Stock _____ has the highest risk premium.

The common stock of Blasco Books has a standard deviation of 16.4 percent as compared to the market standard deviation of 12.7 percent. The covariance of this stock with the market is .0217. What is the beta of Blasco Books' stock?