Question 1

Which of the following is not a component of the security market line equation?

Accepted Answer

A) risk-free rate 
B) expected return on the market 
C) an asset's systematic risk 
D) an asset's unsystematic risk 
A) risk-free rate 
B) expected return on the market 
C) an asset's systematic risk 
D) an asset's unsystematic risk

Question 2

Beta measures the variability of an asset's returns relative to the market portfolio.

Accepted Answer

A) True 
 B)False

Question 3

The correlation between the return on the risk-free asset with a constant return over time and the return on a risky asset is always:

Accepted Answer

A) .-1 
B) 0 
C) 1 
D) 0.5 
A) .-1 
B) 0 
C) 1 
D) 0.5

Question 4

The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.

Accepted Answer

A) True 
 B)False

Question 5

The portfolio that contains all risky assets is known as the:

Accepted Answer

A) market portfolio 
B) efficient portfolio 
C) efficient frontier 
D) value-weighted portfolio 
A) market portfolio 
B) efficient portfolio 
C) efficient frontier 
D) value-weighted portfolio

Question 6

If the variance in returns for Stock A is 400% and the expected return is 5%, then the coefficient of variation is:

Accepted Answer

A) 4 
B) 80 
C) .25 
D) cannot be determined by this information 
A) 4 
B) 80 
C) .25 
D) cannot be determined by this information

Question 7

Which of the following statements is false?

Accepted Answer

A) most mutual fund shares are traded on the New York Stock Exchange.An expected news event should have a large effect on asset prices in an efficient market. 
B) mutual funds hold assets in the form of corporate and government securities in excess of $2 trillion.if a market is semi-strong efficient it is also weak-form efficient. 
C) the total risk of an asset directly affects the market's return expectations for that asset. 
D) all of the above statements are false. 
A) most mutual fund shares are traded on the New York Stock Exchange.An expected news event should have a large effect on asset prices in an efficient market. 
B) mutual funds hold assets in the form of corporate and government securities in excess of $2 trillion.if a market is semi-strong efficient it is also weak-form efficient. 
C) the total risk of an asset directly affects the market's return expectations for that asset. 
D) all of the above statements are false.

Question 8

In an efficient market, both expected and unexpected news should cause stock prices to move up or down.

Accepted Answer

A) True 
 B)False

Question 9

A portfolio is any combination of financial assets or investments.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is most correct?

Accepted Answer

A) Combining positively correlated assets having the same expected return results in a portfolio with the same level of expected return and a lower level of risk. 
B) Combining negatively correlated assets having the same expected return results in a portfolio with the same level of expected return and a higher level of risk. 
C) Combining positively correlated assets having the same expected return results in a portfolio with a lower level of expected return and a lower level of risk. 
D) Combining negatively correlated assets having the same expected return results in a portfolio with a lower level of expected return and a lower level of risk. 
E) none of the above
Same as 92 with "none of the above" answer…ditto for 94, 96 
A) Combining positively correlated assets having the same expected return results in a portfolio with the same level of expected return and a lower level of risk. 
B) Combining negatively correlated assets having the same expected return results in a portfolio with the same level of expected return and a higher level of risk. 
C) Combining positively correlated assets having the same expected return results in a portfolio with a lower level of expected return and a lower level of risk. 
D) Combining negatively correlated assets having the same expected return results in a portfolio with a lower level of expected return and a lower level of risk. 
E) none of the above
Same as 92 with "none of the above" answer…ditto for 94, 96

Question 11

Which one of the following is not considered to be a generally recognized type of market efficiency?

Accepted Answer

A) strong-form 
B) semi-strong form 
C) weak-form 
D) insider-information form 
A) strong-form 
B) semi-strong form 
C) weak-form 
D) insider-information form

Question 12

The variance of a portfolio would can be calculated by finding the variances of the individual components of the portfolio and finding the weighted average of those variances.

Accepted Answer

A) True 
 B)False

Question 13

If the variance for Stock A is greater than the variance for Stock B, then the coefficient of variation for Stock A:

Accepted Answer

A) is greater than the coefficient of variation for Stock B 
B) is less than the coefficient of variation for Stock B 
C) is the same as the coefficient of variation for stock b 
D) cannot be determined by this information 
A) is greater than the coefficient of variation for Stock B 
B) is less than the coefficient of variation for Stock B 
C) is the same as the coefficient of variation for stock b 
D) cannot be determined by this information

Question 14

If the variance for Stock A is greater than the variance for Stock B, then the standard deviation for Stock A:

Accepted Answer

A) is greater than the standard deviation for Stock B 
B) is less than the standard deviation for Stock B 
C) is the same as the standard deviation for stock b 
D) cannot be determined by this information 
A) is greater than the standard deviation for Stock B 
B) is less than the standard deviation for Stock B 
C) is the same as the standard deviation for stock b 
D) cannot be determined by this information

Question 15

If Stock A is considered to be of average risk for the market and Stock B is also considered of average risk for the market, then the

Accepted Answer

A) standard deviation for each of the stocks will be equal 
B) beta for each of the stocks will be equal 
C) coefficient of variation for each of the stocks will be equal 
D) cannot determine from the information given 
A) standard deviation for each of the stocks will be equal 
B) beta for each of the stocks will be equal 
C) coefficient of variation for each of the stocks will be equal 
D) cannot determine from the information given

Question 16

If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:

Accepted Answer

A) 12.4% 
B) 13% 
C) 13.6% 
D) 14.5% 
A) 12.4% 
B) 13% 
C) 13.6% 
D) 14.5%

Question 17

The market portfolio is a portfolio that contains all risky assets.

Accepted Answer

A) True 
 B)False

Question 18

If Stock A is considered to be of lower risk than Stock B, then Stock A should have returns that are

Accepted Answer

A) cannot determine from the information given 
B) higher than Stock B 
C) they would have equal returns 
D) lower than Stock B 
A) cannot determine from the information given 
B) higher than Stock B 
C) they would have equal returns 
D) lower than Stock B

Question 19

In comparing the deviations of returns, which one of the following assets has historically had the largest standard deviation of annual returns?

Accepted Answer

A) U.S.Treasury bills 
B) long-term corporate bonds 
C) long-term government bonds 
D) large company stocks 
A) U.S.Treasury bills 
B) long-term corporate bonds 
C) long-term government bonds 
D) large company stocks

Question 20

The historical percentage return for a single financial asset is equal to any dividends received minus the difference between the selling price and the purchase price, all divided by the purchase price.

Accepted Answer

A) True 
 B)False

Which of the following is not a component of the security market line equation?

Beta measures the variability of an asset's returns relative to the market portfolio.

The correlation between the return on the risk-free asset with a constant return over time and the return on a risky asset is always:

The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.

The portfolio that contains all risky assets is known as the:

If the variance in returns for Stock A is 400% and the expected return is 5%, then the coefficient of variation is:

Which of the following statements is false?

In an efficient market, both expected and unexpected news should cause stock prices to move up or down.

A portfolio is any combination of financial assets or investments.

Which of the following statements is most correct?

Which one of the following is not considered to be a generally recognized type of market efficiency?

The variance of a portfolio would can be calculated by finding the variances of the individual components of the portfolio and finding the weighted average of those variances.

If the variance for Stock A is greater than the variance for Stock B, then the coefficient of variation for Stock A:

If the variance for Stock A is greater than the variance for Stock B, then the standard deviation for Stock A:

If Stock A is considered to be of average risk for the market and Stock B is also considered of average risk for the market, then the

If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:

The market portfolio is a portfolio that contains all risky assets.

If Stock A is considered to be of lower risk than Stock B, then Stock A should have returns that are

In comparing the deviations of returns, which one of the following assets has historically had the largest standard deviation of annual returns?

The historical percentage return for a single financial asset is equal to any dividends received minus the difference between the selling price and the purchase price, all divided by the purchase price.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 12: Financial Return and Risk Concepts

Which of the following is not a component of the security market line equation?

Beta measures the variability of an asset's returns relative to the market portfolio.

The correlation between the return on the risk-free asset with a constant return over time and the return on a risky asset is always:

The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.

The portfolio that contains all risky assets is known as the:

If the variance in returns for Stock A is 400% and the expected return is 5%, then the coefficient of variation is:

Which of the following statements is false?

In an efficient market, both expected and unexpected news should cause stock prices to move up or down.

A portfolio is any combination of financial assets or investments.

Which of the following statements is most correct?

Which one of the following is not considered to be a generally recognized type of market efficiency?

The variance of a portfolio would can be calculated by finding the variances of the individual components of the portfolio and finding the weighted average of those variances.

If the variance for Stock A is greater than the variance for Stock B, then the coefficient of variation for Stock A:

If the variance for Stock A is greater than the variance for Stock B, then the standard deviation for Stock A:

If Stock A is considered to be of average risk for the market and Stock B is also considered of average risk for the market, then the

If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:

The market portfolio is a portfolio that contains all risky assets.

If Stock A is considered to be of lower risk than Stock B, then Stock A should have returns that are

In comparing the deviations of returns, which one of the following assets has historically had the largest standard deviation of annual returns?

The historical percentage return for a single financial asset is equal to any dividends received minus the difference between the selling price and the purchase price, all divided by the purchase price.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters