Question 1

A stock has an expected return of 14.3 per cent,the risk-free rate is 3.2 per cent,and the market risk premium is 8.1 per cent.What must the beta of this stock be?

Accepted Answer

A)  1.21
B)  0.94
C)  1.08
D)  1.37
E)  0.88F) A) and C)
G) A) and B)

Question 2

Consider the following information on three securities:
Security ______ has the greatest total risk,and security _______ will have the highest risk premium.

Accepted Answer

A)  B;C
B)  A;B
C)  C;B
D)  C;A
E)  A;AF) A) and E)
G) A) and B)

Question 3

The addition of a risky security to a fully diversified portfolio:

Accepted Answer

A)  will increase the unsystematic risk of the portfolio
B)  may or may not affect the portfolio beta
C)  must decrease the portfolio's expected return
D)  must increase the portfolio beta
E)  will have no effect on the portfolio beta or its expected returnF) A) and B)
G) A) and C)

Question 4

Which one of the following is the best example of an announcement that is most apt to result in an unexpected return?

Accepted Answer

A)  the verification by senior management that the firm is being acquired as had been rumored
B)  a statement by a firm that it has just discovered a manufacturing defect and is recalling its product
C)  an announcement that a firm will continue its practice of paying a $3 a share annual dividend
D)  an announcement that the CFO of the firm is retiring June 1st as previously announced
E)  a news bulletin that the anticipated lay-offs in a firm will occur as expected on December 1F) C) and D)
G) A) and C)

Question 5

Which one of the following statements is correct?

Accepted Answer

A)  The expected rate of return on any security,given multiple states of the economy,must be positive.
B)  There is an inverse relationship between the level of risk and the risk premium given a risky security.
C)  If a risky security is priced correctly,it will have an expected return equal to the risk-free rate.
D)  The risk premium on a risk-free security is generally considered to be one per cent.
E)  If a risky security is correctly priced,its expected risk premium will be positive.F) A) and B)
G) None of the above

Question 6

The Capital Assets Pricing Model (CAPM) shows that the expected return for a particular asset depends mostly on:

Accepted Answer

A)  the expected dividend growth
B)  the pure time value of money
C)  the reward for bearing non-systematic risk
D)  the amount of non-systematic risk
E)  the state of economyF) All of the above
G) C) and E)

Question 7

The risk associated with the overall market is referred to as _____ risk.

Accepted Answer

A)  portfolio
B)  total
C)  diversified
D)  unsystematic
E)  systematicF) A) and C)
G) A) and E)

Question 8

The amount of compensation an investor should expect for accepting unsystematic risk:

Accepted Answer

A)  is $0
B)  is equal to the market risk premium
C)  is equal to beta multiplied by the market rate of return
D)  varies indirectly with the beta of the firm
E)  is equal to the beta of the firm multiplied by the market risk premiumF) A) and E)
G) C) and D)

Exam 11: Risk and Return

The amount of compensation an investor should expect for accepting unsystematic risk:

Correct Answer
verified

A stock has an expected return of 14.3 per cent,the risk-free rate is 3.2 per cent,and the market risk premium is 8.1 per cent.What must the beta of this stock be?

Correct Answer
verified

Consider the following information on three securities: Security has the greatest total risk,and security _ will have the highest risk premium.

Correct Answer
verified

Which one of the following statements is correct?

Correct Answer
verified

The risk associated with the overall market is referred to as _____ risk.

Correct Answer
verified

Which one of the following is the best example of an announcement that is most apt to result in an unexpected return?

Correct Answer
verified

The addition of a risky security to a fully diversified portfolio:

Correct Answer
verified

The Capital Assets Pricing Model (CAPM) shows that the expected return for a particular asset depends mostly on:

Correct Answer
verified

Exam 11: Risk and Return

The amount of compensation an investor should expect for accepting unsystematic risk:

Correct AnswerverifiedShow Answer

A stock has an expected return of 14.3 per cent,the risk-free rate is 3.2 per cent,and the market risk premium is 8.1 per cent.What must the beta of this stock be?

Correct AnswerverifiedShow Answer

Consider the following information on three securities: Security ______ has the greatest total risk,and security _______ will have the highest risk premium.

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

The risk associated with the overall market is referred to as _____ risk.

Correct AnswerverifiedShow Answer

Which one of the following is the best example of an announcement that is most apt to result in an unexpected return?

Correct AnswerverifiedShow Answer

The addition of a risky security to a fully diversified portfolio:

Correct AnswerverifiedShow Answer

The Capital Assets Pricing Model (CAPM) shows that the expected return for a particular asset depends mostly on:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Consider the following information on three securities: Security has the greatest total risk,and security _ will have the highest risk premium.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified