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Chpt 10 pt 2

Question 1 of 35

1

Stand-alone = Portfolio + Diversifiable
risk risk r isk

Select one of the following:

  • Stand-alone = Greek Yogurt + Diversifiable

  • Stand-alone = Portfolio + Diversifiable

  • Stand-alone = Paper + Diversifiable

Explanation

Question 2 of 35

1

Two of the most important financial analysis concepts are risk and return.

Select one of the following:

  • rate and return

  • risk and return

Explanation

Question 3 of 35

1

What is financial risk, how is it measured, and why is it so important to financial decision making?

Select one of the following:

  • important to financial decision making?

  • important to no financial decision making?

Explanation

Question 4 of 35

1

The risk of a portfolio (sp) decreases as more and more investments are randomly added.

Select one of the following:

  • True
  • False

Explanation

Question 5 of 35

1

The risk of a portfolio (sp) -------- as more and more investments are randomly added.

Select one of the following:

  • decreases

  • increases

Explanation

Question 6 of 35

1

The risk of a portfolio (sp) decreases as more and more investments are randomly added.
However, the incremental risk reduction from each new investment decreases as more assets are added.
Considerable risk remains regardless of the number of assets added.

However, the incremental risk reduction from each new investment --- as more assets are added.

Select one of the following:

  • increase

  • decrease

Explanation

Question 7 of 35

1

Considerable risk remains regardless of the number of assets added.

Select one of the following:

  • remain

  • doesnt remain

Explanation

Question 8 of 35

1

Stand-alone risk is the risk of an individual investment when it is held in ------.

Diversifiable risk is that part of the stand-alone risk that can be eliminated by diversification.

Select one of the following:

  • isolation

  • together

Explanation

Question 9 of 35

1

Stand-alone risk is the risk of an individual investment when it is held in isolation.

Diversifiable risk is that part of the stand-alone risk that can be eliminated by -------

Select one of the following:

  • diversifcation

  • quantitative data

Explanation

Question 10 of 35

1

Diversifiable risk is that part of the stand-alone risk that can be eliminated by diversification.
Portfolio risk is that part of the stand-alone risk that cannot be eliminated by diversification

Select one of the following:

  • True
  • False

Explanation

Question 11 of 35

1

what cannot be eliminated by diversification?

Select one of the following:

  • deliverable risk

  • portfolio risk

Explanation

Question 12 of 35

1

It is --- rationale for an investor, whether an individual or business, to hold a single investment.

Select one of the following:

  • not

  • super

Explanation

Question 13 of 35

1

It is not rationale for an investor, whether an individual or business, to hold ---------

Select one of the following:

  • single investment

  • multiple investment

Explanation

Question 14 of 35

1

It is not rationale for an investor, whether an individual or business, to hold a single investment.

Because an investment held in a portfolio is less risky than when held in isolation,

stand-alone risk measures (i.e., s) are not relevant for investments held in portfolios.

Because an investment held in a -------- is less risky than when held in isolation,

Select one of the following:

  • portfolio

  • ageneda

Explanation

Question 15 of 35

1

The most widely used measure of risk for investments held in portfolios is the beta coefficient, or just beta.

Select one of the following:

  • True
  • False

Explanation

Question 16 of 35

1

The most widely used measure of risk

Select one of the following:

  • beta

  • one

Explanation

Question 17 of 35

1

The most widely used measure of risk for investments held in portfolios is the beta coefficient, or just beta.
Beta measures the volatility of the investment’s returns relative to the returns on the portfolio.
Because beta is a relative measure of risk, it depends on both the investment and the portfolio.

Select one of the following:

  • it depends on both the investment and the portfolio.

  • it depends on both the investment and the agenda

Explanation

Question 18 of 35

1

If beta = 1.0, investment has average risk, where average is defined as the riskiness of the portfolio.
If beta > 1.0, investment has above-average risk.
If beta < 1.0, investment has below-average risk.
Most investments have betas in the range of 0.5 to 1.5.

=========
If beta < 1.0.........

Select one of the following:

  • investment has average risk

  • investment has above-average risk

  • investment has below-average risk

Explanation

Question 19 of 35

1

Most investments have betas in the range of 0.5 to 1.5.

Select one of the following:

  • True
  • False

Explanation

Question 20 of 35

1

Most investments have betas in the range of ---- to 1.5.

Select one of the following:

  • 0.1

  • 0.0

  • 0.5

Explanation

Question 21 of 35

1

The CAPM is based on a very restrictive set of assumptions.
It has not been empirically verified.
It is based on investor expectations, but the inputs used in the model typically are based on historical data.

Select one of the following:

  • True
  • False

Explanation

Question 22 of 35

1

The CAPM is based on a very ________ set of assumptions.
It has not been empirically verified.
It is based on investor expectations, but the inputs used in the model typically are based on historical data.

Select one of the following:

  • unrestrictive

  • restrictive

Explanation

Question 23 of 35

1

CAPM It is based on investor expectations, but the inputs used in the model typically are based on ---- data.

Select one of the following:

  • bar

  • historical

Explanation

Question 24 of 35

1

Some Good News About the CAPM

The CAPM provides investors with a very rational way of thinking about required rates of return..
R(Re) is composed of:
The risk-free rate, which compensates investors for the time value of money.
A risk premium, which compensates investors for the amount of portfolio risk assumed.

Select one of the following:

  • True
  • False

Explanation

Question 25 of 35

1

Some Good News About the CAPM

The CAPM provides investors with a very ------ way of thinking about required rates of return..
R(Re) is composed of:
The risk-free rate, which compensates investors for the time value of money.
A risk premium, which compensates investors for the amount of portfolio risk assumed.

Select one of the following:

  • unrational

  • rational

Explanation

Question 26 of 35

1

The ---------- which compensates investors for the time value of money.
A risk premium, which compensates investors for the amount of portfolio risk assumed.

Select one of the following:

  • not risk free rate

  • risk free rate

Explanation

Question 27 of 35

1

Portfolio Risk

If the investor is an individual, the investments are individual securities (stocks), the portfolio is the market portfolio, and the relevant risk of each asset is called market risk.
If the investor is a business, the investments are real assets (projects), the portfolio is the entire business, and the relevant risk of each asset is called corporate risk .

Select one of the following:

  • True
  • False

Explanation

Question 28 of 35

1

Portfolio Risk

If the investor is an individual, the investments are individual --------- (stocks), the portfolio is the market portfolio, and the relevant risk of each asset is called market risk.
If the investor is a business, the investments are real assets (projects), the portfolio is the entire business, and the relevant risk of each asset is called corporate risk .

Select one of the following:

  • not securities

  • securities

Explanation

Question 29 of 35

1

If the investor is a business, the investments are ------- assests which are known as -------

Select one of the following:

  • assests, project

  • not assets, not business

Explanation

Question 30 of 35

1

In for-profit businesses, projects have both corporate risk and market risk.
The risk of the project as seen by the business’s managers is corporate risk, which is measured by its corporate beta.
The risk of the project as seen by the business’s shareholders is market risk, which is measured by market beta.

Select one of the following:

  • In for-profit businesses, projects have both corporate risk and market risk.

  • In for-profit businesses, projects does have both corporate risk and market risk.

Explanation

Question 31 of 35

1

The risk of the project as seen by the business’s managers is corporate risk, which is measured by its corporate beta.

Select one of the following:

  • corporate

  • incorporate

Explanation

Question 32 of 35

1

what is measured by market beta

Select one of the following:

  • business shareholders

  • business managers

Explanation

Question 33 of 35

1

The beta of portfolio is simply the weighted average of the betas of the component investments.

Select one of the following:

  • beta of portfolio is simply the weighted average

  • beta of portfolio is not simply the weighted average

Explanation

Question 34 of 35

1

Risk and Required Return

Defining and measuring risk is of no value if we cannot relate risk to required rate of return.

Select one of the following:

  • True
  • False

Explanation

Question 35 of 35

1

Risk and Required Return

Defining and measuring risk is of ------ value if we cannot relate risk to required rate of return.

Select one of the following:

  • a

  • no

Explanation

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