Question 1

A stock with an actual return that lies above the security market line has:

Accepted Answer

A)  more systematic risk than the overall market.
B)  more risk than that warranted by CAPM.
C)  a higher return than expected for the level of risk assumed.
D)  less systematic risk than the overall market.
E)  a return equivalent to the level of risk assumed.F) B) and C)
G) A) and E)

Question 2

Which one of the following is least apt to reduce the unsystematic risk of a portfolio?

Accepted Answer

A)  reducing the number of stocks held in the portfolio
B)  adding bonds to a stock portfolio
C)  adding international securities into a portfolio of U.S. stocks
D)  adding U.S. Treasury bills to a risky portfolio
E)  adding technology stocks to a portfolio of industrial stocksF) A) and E)
G) A) and C)

Question 3

Which one of the following measures the amount of systematic risk present in a particular risky asset relative to the systematic risk present in an average risky asset?

Accepted Answer

A)  beta
B)  reward-to-risk ratio
C)  risk ratio
D)  standard deviation
E)  price-earnings ratioF) A) and B)
G) B) and E)

Question 4

Which one of the following is a positively sloped linear function that is created when expected returns are graphed against security betas?

Accepted Answer

A)  reward-to-risk matrix
B)  portfolio weight graph
C)  normal distribution
D)  security market line
E)  market real returnsF) B) and D)
G) A) and C)

Question 5

The expected rate of return on a stock portfolio is a weighted average where the weights are based on the:

Accepted Answer

A)  number of shares owned of each stock.
B)  market price per share of each stock.
C)  market value of the investment in each stock.
D)  original amount invested in each stock.
E)  cost per share of each stock held.F) B) and E)
G) All of the above

Question 6

Your portfolio has a beta of 1.12.The portfolio consists of 40 percent U.S.Treasury bills,30 percent stock A,and 30 percent stock B.Stock A has a risk-level equivalent to that of the overall market.What is the beta of stock B?

Accepted Answer

A)   1.47
B)   1.52
C)   1.69
D)   1.84
E)   2.73F) A) and D)
G) D) and E)

Question 7

You would like to combine a risky stock with a beta of 1.68 with U.S.Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the portfolio should be invested in the risky stock?

Accepted Answer

A)  32 percent
B)  40 percent
C)  54 percent
D)  60 percent
E)  68 percentF) A) and E)
G) A) and D)

Question 8

Which of the following are examples of diversifiable risk?
I.earthquake damages an entire town
II.federal government imposes a $100 fee on all business entities
III.employment taxes increase nationally
IV.toymakers are required to improve their safety standards

Accepted Answer

A)  I and III only
B)  II and IV only
C)  II and III only
D)  I and IV only
E)  I, III, and IV onlyF) A) and B)
G) B) and E)

Question 9

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

Accepted Answer

A)  income taxes are increased across the board
B)  a national sales tax is adopted
C)  inflation decreases at the national level
D)  an increased feeling of prosperity is felt around the globe
E)  consumer spending on entertainment decreased nationallyF) B) and E)
G) D) and E)

Exam 13: Return, Risk, and the Security Market Line

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

Correct Answer
verified

Which one of the following measures the amount of systematic risk present in a particular risky asset relative to the systematic risk present in an average risky asset?

Correct Answer
verified

Your portfolio has a beta of 1.12.The portfolio consists of 40 percent U.S.Treasury bills,30 percent stock A,and 30 percent stock B.Stock A has a risk-level equivalent to that of the overall market.What is the beta of stock B?

Correct Answer
verified

The expected rate of return on a stock portfolio is a weighted average where the weights are based on the:

Correct Answer
verified

You would like to combine a risky stock with a beta of 1.68 with U.S.Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the portfolio should be invested in the risky stock?

Correct Answer
verified

Which one of the following is least apt to reduce the unsystematic risk of a portfolio?

Correct Answer
verified

Which one of the following is a positively sloped linear function that is created when expected returns are graphed against security betas?

Correct Answer
verified

A stock with an actual return that lies above the security market line has:

Correct Answer
verified

Which of the following are examples of diversifiable risk? I.earthquake damages an entire town II.federal government imposes a $100 fee on all business entities III.employment taxes increase nationally IV.toymakers are required to improve their safety standards

Correct Answer
verified

Exam 13: Return, Risk, and the Security Market Line

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

Correct AnswerverifiedShow Answer

Which one of the following measures the amount of systematic risk present in a particular risky asset relative to the systematic risk present in an average risky asset?

Correct AnswerverifiedShow Answer

Your portfolio has a beta of 1.12.The portfolio consists of 40 percent U.S.Treasury bills,30 percent stock A,and 30 percent stock B.Stock A has a risk-level equivalent to that of the overall market.What is the beta of stock B?

Correct AnswerverifiedShow Answer

The expected rate of return on a stock portfolio is a weighted average where the weights are based on the:

Correct AnswerverifiedShow Answer

You would like to combine a risky stock with a beta of 1.68 with U.S.Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the portfolio should be invested in the risky stock?

Correct AnswerverifiedShow Answer

Which one of the following is least apt to reduce the unsystematic risk of a portfolio?

Correct AnswerverifiedShow Answer

Which one of the following is a positively sloped linear function that is created when expected returns are graphed against security betas?

Correct AnswerverifiedShow Answer

A stock with an actual return that lies above the security market line has:

Correct AnswerverifiedShow Answer

Which of the following are examples of diversifiable risk? I.earthquake damages an entire town II.federal government imposes a $100 fee on all business entities III.employment taxes increase nationally IV.toymakers are required to improve their safety standards

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified