Question 1

Portfolio risk is comprised of:

Accepted Answer

A) systematic and market risk 
B) unsystematic and microeconomic risk 
C) systematic and unsystematic risk 
D) systematic and macroeconomic risk

Question 2

If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the market portfolio is 18%, the expected return on IBM is:

Accepted Answer

A) 17.2% 
B) 20.4% 
C) 22.1% 
D) 23.6%

Question 3

If prices in a particular market fully reflect all public and private knowledge, the market is efficient in the:

Accepted Answer

A) weak form 
B) semi-strong form 
C) strong form 
D) both a and b

Question 4

A fruit company has 20% returns in periods of normal rainfall and -3% returns in droughts.The probability of normal rainfall is 60% and droughts 40%.What would the fruit company's expected returns be?

Accepted Answer

A) 24% 
B) 10.8% 
C) 0 
D) cannot determine from the information given

Question 5

The variance is the square root of the standard deviation.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not required to compute the expected return of a three-asset portfolio?

Accepted Answer

A) the amount invested in each stock 
B) the correlation between the returns on each stock 
C) the expected return on each stock 
D) all of the above are required

Question 7

If a person requires greater return when risk increases, that person is said to be:

Accepted Answer

A) risk seeking 
B) risk diverse 
C) risk aware 
D) risk indifferent 
E) none of the above

Question 8

An asset's beta can be estimated by regressing its returns against the returns for the market portfolio.

Accepted Answer

A) True 
 B)False

Question 9

80100.Between 1928 and 2008, the average annual return on Treasury Bills averaged _____%, while the average annual inflation rate averaged _____%.

Accepted Answer

A) 5.4, 3.8 
B) 3.8, 3.2 
C) 3.8, 5.4 
D) none of the above

Question 10

In general, securities with lower returns have lower historical standard deviations.

Accepted Answer

A) True 
 B)False

Question 11

The ____________ the coefficient of variation, the ____________ the risk. Same as 75 with "none of the above" answer

Accepted Answer

A) lower, more stable 
B) higher, lower 
C) lower, higher 
D) more stable, higher 
E) none of the above

Question 12

In general, securities with higher historical standard deviations have provided higher returns.

Accepted Answer

A) True 
 B)False

Question 13

Standard deviation is stated in the same units of measurement (e.g., dollars, percent) as those of the data from which they were generated.

Accepted Answer

A) True 
 B)False

Question 14

Unlike ____________ , _____________can continually sell new shares to willing investors.

Accepted Answer

A) open-ended funds, closed-end funds 
B) closed-end funds, open-ended funds 
C) closed-end funds, mutual funds 
D) two of the above

Question 15

The square root of the standard deviation is called the:

Accepted Answer

A) variance 
B) coefficient of variation 
C) beta 
D) none of the above

Question 16

The risk cause by variations in interest expense unrelated to sales or operating income arising from changes in the level of interest rates in the economy is called:

Accepted Answer

A) 	financial risk 
B) 	business risk 
C) 	tax risk 
D)   	purchasing power risk 
E)  	none of the above

Question 17

Which of the following statements is most correct?

Accepted Answer

A) The improbability of an event occurring is the percentage of a given outcome. 
B) A skewed probability distribution shows all possible outcomes and associated probabilities for a given event. 
C) The standard evaluation measures the dispersion around the expected value. 
D) The constant of variation is a measure of relative dispersion used in comparing the risk of assets with differing expected returns. 
E) none of the above

Question 18

Systematic risk is rewarded with a premiumhigher returns in the market because:

Accepted Answer

A) it is associated with market movements which cannot be eliminated through diversification 
B) it is a microeconomic risk 
C) that risk is unique to a firm or an industry 
D) none of the above

Question 19

Which of the following statements is most correct?

Accepted Answer

A) Perfectly negatively correlated series move exactly together and have a correlation coefficient of -1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of +1.0. 
B) Perfectly negatively correlated series move exactly together and have a correlation coefficient of +1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0. 
C) Perfectly positively correlated series move exactly together and have a correlation coefficient of +1.0 while perfectly negatively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0. 
D) Perfectly positively correlated series move exactly together and have a correlation coefficient of -1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of +1.0. 
E) none of the above

Question 20

The relevant measure of risk for a diversified portfolio of assets is the portfolio's level of:

Accepted Answer

A) systematic risk 
B) unsystematic risk 
C) diversifiable risk 
D) company specific risk

Exam 12: Financial Return and Risk Concepts

Portfolio risk is comprised of:

If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the market portfolio is 18%, the expected return on IBM is:

If prices in a particular market fully reflect all public and private knowledge, the market is efficient in the:

A fruit company has 20% returns in periods of normal rainfall and -3% returns in droughts.The probability of normal rainfall is 60% and droughts 40%.What would the fruit company's expected returns be?

The variance is the square root of the standard deviation.

Which of the following is not required to compute the expected return of a three-asset portfolio?

If a person requires greater return when risk increases, that person is said to be:

An asset's beta can be estimated by regressing its returns against the returns for the market portfolio.

80100.Between 1928 and 2008, the average annual return on Treasury Bills averaged _%, while the average annual inflation rate averaged _%.

In general, securities with lower returns have lower historical standard deviations.

The the coefficient of variation, the the risk. Same as 75 with "none of the above" answer

In general, securities with higher historical standard deviations have provided higher returns.

Standard deviation is stated in the same units of measurement (e.g., dollars, percent) as those of the data from which they were generated.

Unlike , _can continually sell new shares to willing investors.

The square root of the standard deviation is called the:

The risk cause by variations in interest expense unrelated to sales or operating income arising from changes in the level of interest rates in the economy is called:

Which of the following statements is most correct?

Systematic risk is rewarded with a premiumhigher returns in the market because:

Which of the following statements is most correct?

The relevant measure of risk for a diversified portfolio of assets is the portfolio's level of: