Ch 13 Finance Practice

The expected return on a stock given various states of the economy is equal to the:

The expected risk premium on a stock is equal to the expected return on the stock minus the:

Steve has invested in twelve different stocks that have a combined value today of $121,300. Fifteen percent of that total is invested in Wise Man Foods. The 15 percent is a measure of which one of the following?

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

The expected return on a portfolio considers which of the following factors? I. Percentage of the portfolio invested in each individual security II. Projected states of the economy III. The performance of each security given various economic states IV. Probability of occurrence for each state of the economy

If a stock portfolio is well diversified, then the portfolio variance:

The standard deviation of a portfolio:

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

Unsystematic risk

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

Which one of the following is a risk that applies to most securities?

The principle of diversification tells us that:

Which one of the following risks is irrelevant to a well-diversified investor?

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

Which one of the following indicates a portfolio is being effectively diversified?

Which of the following statements concerning risk are correct? I. Non-diversifiable risk is measured by beta. II. The risk premium increases as diversifiable risk increases. III. Systematic risk is another name for non-diversifiable risk. IV. Diversifiable risks are market risks you cannot avoid.

Systematic risk is measured by:

Which one of the following statements is correct concerning a portfolio beta?

The systematic risk of the market is measured by a:

Total risk is measured by _____ and systematic risk is measured by _____.

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?

At a minimum, which of the following would you need to know to estimate the amount of additional reward you will receive for purchasing a risky asset instead of a risk-free asset? I. Asset's standard deviation II. Asset's beta III. Risk-free rate of return IV. Market risk premium

Which one of the following is represented by the slope of the security market line?

The intercept point of the security market line is the rate of return which corresponds to:

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

Which one of the following will be constant for all securities if the market is efficient and securities are priced fairly?

The market risk premium is computed by:

Which one of the following should earn the highest risk premium based on CAPM?