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Devry FIN 351 Week 7 Quiz

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Devry FIN 351 Week 7 Quiz

Score for this quiz: 30 out of 30

Question 1
3 / 3 pts
(TCO 7) Because of portfolio effect, the most significant factor related to the risk of any investment is _____.
1) its standard deviation, or degree of uncertainty
2) its effect on the risk of the portfolio
3) systematic risk associated with the investment
4) None of the above

Question 2
3 / 3 pts
(TCO 7) The capital market line can be used to determine the expected return on any portfolio based on _____.
1) unsystematic risk
2) the degree of risk on that portfolio
3) the market rate of return
4) None of the above

Question 3
3 / 3 pts
(TCO 7) The beta coefficient is a measure of _____.
1) the relationship between the return of an individual stock and the return on the market
2) the relationship between the return on a stock and the return on the portfolio
3) the relationship between the portfolio risk and the market risk
4) None of the above

Question 4
3 / 3 pts
(TCO 7) Countercyclical investments are more likely to have _____.
1) high positive correlation with a normal portfolio
2) slight positive correlation with a normal portfolio
3) no correlation with a normal portfolio
4) high negative correlation with a normal portfolio

Question 5
3 / 3 pts
(TCO 7) The risk that is assumed to be rewarded for an individual stock under the capital asset pricingĀ model is measured by the _____.
1) portfolio standard deviation
2) portfolio beta
3) individual stock’s standard deviation
4) individual stock’s beta

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Question 6
3 / 3 pts
(TCO 7) Assume a portfolio has the possibility of returning 7%, 8%, 10%, or 12%, with the likelihood of 18%, 20%, 15%, and 30%, respectively. The expected value of the portfolio is _____.
1) 7.96%
2) 7.0%
3) 7.69%
4) 7.46%

Question 7
3 / 3 pts
(TCO 7) If the market rate of return is 10% and the beta on a particular stock is 1.25, the return on the stock will be _____.
1) greater than 10%
2) greater or less than 10%, depending on the risk-free rate of return
3) less than 10%
4) dependent on some other factor

Question 8
3 / 3 pts
(TCO 7) For two investments with a correlation coefficient (rij) equal to +1, the portfolio standard deviation will be __________ the weighted average of the individual investments’ standard deviation.
1) more than
2) less than
3) equal to
4) zero compared to

Question 9
3 / 3 pts
(TCO 7) One way to express the tradeoff between risk and return for an individual security is through _____.
1) the security market line
2) the beta coefficient
3) the correlation coefficient
4) arbitrage pricing theory

Question 10
3 / 3 pts
(TCO 7) Using the formula for the security market line (Formula 21-7), if the risk-free rate (RF) is 5%, the market rate of return (KM) is 12%, and the beta (bi) is .80, compute the anticipated return for stock i (Ki).
1) 5.6%
2) 10.6%
3) 14.6%
4) 12%