FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

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

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

Which one of these statements is correct concerning expected and unexpected returns?

A) Total return is equal to the expected return.
B) The unexpected return is solely related to unsystematic risk.
C) The unexpected return is solely related to systematic risk.
D) The unsystematic portion of the surprise component of a return is diversifiable risk.
E) Total return is equal to the expected return minus the surprise.

F) None of the above
G) B) and E)

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

What is the expected return on a portfolio with weights of 60% in asset A and 40% in asset B?

A) 2.2%
B) 4.4%
C) 5.8%
D) 8.8%
E) 9.9%

F) A) and D)
G) B) and C)

Correct Answer

verified

Show Answer

Question 33

Multiple Choice

Review LaterAdd Note

A stock has a beta of.8 and an expected return of 6%. The risk-free rate is 3%. What is the expected return on the market?

In a highly competitive market, all stocks should:

An asset's undiversifiable risk is measured by its ______________.

Provide a graphical representation of systematic and unsystematic risk within the context of portfolio diversification.

Portfolio betas will always be greater than 1.0.

Eliminating unsystematic risk is the responsibility of the individual investor.

Given the following information, what is the portfolio standard deviation?

You want your portfolio beta to be 1.30. Currently, your portfolio consists of $200 invested in stock A with a beta of 1.6 and $400 in stock B with a beta of.8. You have another $600 to invest and want to divide it between an asset with a beta of 1.9 and a risk-free asset. Approximately how much should you invest in the risk-free asset?

Which one of the following stocks is correctly priced if the risk-free rate of return is 3.6% and the market rate of return is 10.5%?

A stock has a beta of 1.4. The expected return on the market is 8% and T-bills are yielding 2%. What is the expected return on the stock?

What is the portfolio beta if 25% of your funds are invested in the market portfolio, 25% in an asset with twice as much risk as the market portfolio, and the remainder in a risk-free asset?

Which one of the following statements concerning beta is correct?

What is the standard deviation of security A?

A stock has a beta of 1.2 and an expected return of 12%. The market is expected to yield 11%. What is the security market line intercept point?

The market risk premium of an individual security is dependent upon the risk-free rate of return.

What is the risk premium for the following returns if the risk-free rate is 5%?

Using the Capital Asset Pricing Model (CAPM), a decrease in the security's beta will increase the expected rate of return on an individual security. Assume that the security's beta, the risk-free rate of return, and the market rate of return are all positive.

Provide a graphical representation of the volatility of the efficient frontier.