Exam 9: Risk and Return

When comparing two equal-sized investments, the ____ is an appropriate measure of total risk.

The goal of a portfolio owner is to:

Diversifiable risk is:

Assume a portfolio is made up of four stocks: Expected Investment Beta Return Stock A 18\% \ 150,000 1.20 Stock B 14\% \ 225,000 1.00 Stock C 12\% \ 300,000 0.95 Stock D 20\% \ 75,000 1.25 \ 750,000 The beta for the portfolio is:

If the required return for a stock is 14% annually, what should the stock price be one year from today assuming the current price is $24.00 and a dividend of $0.24 is paid sometime over the year?

Use the following information to calculate your company's expected return. State Probability Return Boom 20\% 40\% Normal 60\% 15\% Recession 20\% (20\%)

A stock has an expected return of 10% and a variance of 25%. Its coefficient of variation is:

The mean of the probability distribution of a stock's return is the statistical representation of the average investor's expected return. It is the return investors plan on receiving when they buy the stock.

Equity is historically:

The SML represents a:

SMK Broadcasting is thinking about increasing its current dividend from $1.00 to either $1.07 (a seven percent growth rate) or $1.10 (a ten percent growth rate). Once it adopts the change, SMK wants to maintain the same dividend growth rate for the foreseeable future. Hence, the required return with the higher growth rate is 16%, while the required return with the lower growth rate is 13%. Which dividend adjustment will result in a higher price for SMK Broadcasting's common stock?

Market risk is caused by events that tend to affect the returns on all stocks.

____ risk CAN be diversified away by investing in a diversified portfolio.

A stock that is risky on a stand-alone basis:

Investors that prefer lower risk when expected returns are equal are said to be:

The CAPM asserts that the only company specific factor affecting required return is:

Which of the following is NOT an example of systematic risk?

Frazier Manufacturing paid a dividend last year of $2, which is expected to grow at a constant rate of 5%. Frazier has a beta of 1.3. If the market is returning 11% and the risk-free rate is 4%, calculate the value of Frazier's stock.

A rational investor will make an investment only if he or she believes the required return is equal to or higher than expected return.

Elephant Company common stock has a beta of 1.2. The risk-free rate is 6 percent and the expected market rate of return is 12 percent. Determine the required rate of return on the security.