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Chpt 10 pt 2

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easy
nkhsemail
Quiz by nkhsemail, updated more than 1 year ago
nkhsemail
Created by nkhsemail over 8 years ago
13
0
9

Resource summary

Question 1

Question
Stand-alone = Portfolio + Diversifiable risk risk r isk
Answer
  • Stand-alone = Greek Yogurt + Diversifiable
  • Stand-alone = Portfolio + Diversifiable
  • Stand-alone = Paper + Diversifiable

Question 2

Question
Two of the most important financial analysis concepts are risk and return.
Answer
  • rate and return
  • risk and return

Question 3

Question
What is financial risk, how is it measured, and why is it so important to financial decision making?
Answer
  • important to financial decision making?
  • important to no financial decision making?

Question 4

Question
The risk of a portfolio (sp) decreases as more and more investments are randomly added.
Answer
  • True
  • False

Question 5

Question
The risk of a portfolio (sp) -------- as more and more investments are randomly added.
Answer
  • decreases
  • increases

Question 6

Question
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.
Answer
  • increase
  • decrease

Question 7

Question
Considerable risk remains regardless of the number of assets added.
Answer
  • remain
  • doesnt remain

Question 8

Question
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.
Answer
  • isolation
  • together

Question 9

Question
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 -------
Answer
  • diversifcation
  • quantitative data

Question 10

Question
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
Answer
  • True
  • False

Question 11

Question
what cannot be eliminated by diversification?
Answer
  • deliverable risk
  • portfolio risk

Question 12

Question
It is --- rationale for an investor, whether an individual or business, to hold a single investment.
Answer
  • not
  • super

Question 13

Question
It is not rationale for an investor, whether an individual or business, to hold ---------
Answer
  • single investment
  • multiple investment

Question 14

Question
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,
Answer
  • portfolio
  • ageneda

Question 15

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

Question 16

Question
The most widely used measure of risk
Answer
  • beta
  • one

Question 17

Question
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.
Answer
  • it depends on both the investment and the portfolio.
  • it depends on both the investment and the agenda

Question 18

Question
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.........
Answer
  • investment has average risk
  • investment has above-average risk
  • investment has below-average risk

Question 19

Question
Most investments have betas in the range of 0.5 to 1.5.
Answer
  • True
  • False

Question 20

Question
Most investments have betas in the range of ---- to 1.5.
Answer
  • 0.1
  • 0.0
  • 0.5

Question 21

Question
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.
Answer
  • True
  • False

Question 22

Question
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.
Answer
  • unrestrictive
  • restrictive

Question 23

Question
CAPM It is based on investor expectations, but the inputs used in the model typically are based on ---- data.
Answer
  • bar
  • historical

Question 24

Question
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.
Answer
  • True
  • False

Question 25

Question
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.
Answer
  • unrational
  • rational

Question 26

Question
The ---------- which compensates investors for the time value of money. A risk premium, which compensates investors for the amount of portfolio risk assumed.
Answer
  • not risk free rate
  • risk free rate

Question 27

Question
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 .
Answer
  • True
  • False

Question 28

Question
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 .
Answer
  • not securities
  • securities

Question 29

Question
If the investor is a business, the investments are ------- assests which are known as -------
Answer
  • assests, project
  • not assets, not business

Question 30

Question
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.
Answer
  • 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.

Question 31

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

Question 32

Question
what is measured by market beta
Answer
  • business shareholders
  • business managers

Question 33

Question
The beta of portfolio is simply the weighted average of the betas of the component investments.
Answer
  • beta of portfolio is simply the weighted average
  • beta of portfolio is not simply the weighted average

Question 34

Question
Risk and Required Return Defining and measuring risk is of no value if we cannot relate risk to required rate of return.
Answer
  • True
  • False

Question 35

Question
Risk and Required Return Defining and measuring risk is of ------ value if we cannot relate risk to required rate of return.
Answer
  • a
  • no
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