Estimating Risk And Return

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Question 1

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Multiple Choice

Which of the following is a true statement?

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The risk and return that a firm experienced in the past is also the risk level for its future.

Firms can quite possibly change their stocks' risk level by substantially changing their business.

If a firm takes on riskier new projects over time, the firm itself will become less risky.

If a firm takes on less risky new projects over time, the firm itself will become more risky.

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Question 2

Free

Multiple Choice

Which of the following is the average of the possible returns weighted by the likelihood of those returns occurring?

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efficient return

expected return

market return

required return

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Question 3

Free

Multiple Choice

Which of these is the set of probabilities for all possible occurrences?

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probability

probability distribution

stock market bubble

market probabilities

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Question 4

Free

Multiple Choice

Which of the following is typically considered the return on U.S. government bonds and bills and equals the real interest plus the expected inflation premium?

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required return

risk-free rate

risk premium

market risk premium

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Question 5

Free

Multiple Choice

Which of the following is the reward investors require for taking risk?

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required return

risk-free rate

risk premium

market risk premium

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Question 6

Multiple Choice

Which of these is the reward for taking systematic stock market risk?

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required return

risk-free rate

risk premium

market risk premium

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Question 7

Multiple Choice

Which of the following is a model that includes an equation that relates a stock's required return to an appropriate risk premium?

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asset pricing

behavioral finance

beta

efficient markets

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Question 8

Multiple Choice

Which of the following is the asset pricing theory based on a beta, a measure of market risk?

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behavioral asset pricing model

capital asset pricing model

efficient markets asset pricing model

efficient market hypothesis

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Question 9

Multiple Choice

In theory, which of these is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate?

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efficient market

market portfolio

probability distribution

stock market bubble

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Question 10

Multiple Choice

Which of the following is the use of debt to increase an investment position?

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behavioral finance

financial leverage

probability

stock market bubble

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Question 11

Multiple Choice

Which of these is the line on a graph of return and risk (standard deviation) from the risk-free rate through the market portfolio?

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capital asset pricing line

capital market line

efficient market line

efficient market hypothesis

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Question 12

Multiple Choice

Which of these is a measure of the sensitivity of a stock or portfolio to market risk?

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behavioral finance

beta

efficient market

hedge

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Question 13

Multiple Choice

Which of these is similar to the Capital Market Line, except that risk is characterized by beta instead of standard deviation?

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market risk line

probability market line

security market line

stock market line

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Question 14

Multiple Choice

Which of these is the measurement of risk for a collection of stocks for an investor?

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beta

efficient market

expected return

portfolio beta

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Question 15

Multiple Choice

Which of the following is NOT a necessary condition for an efficient market?

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many buyers and sellers

no prohibitively high barriers to entry

free and readily available information available to all participants

no trading or transaction costs

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Question 16

Multiple Choice

Which of the following are the stocks of small companies that are priced below $1 per share?

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bargain stocks

hedge fund stocks

penny stocks

stock market bubble stocks

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Question 17

Multiple Choice

Which of these is a theory that describes the types of information that are reflected in current stock prices?

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asset pricing

behavioral finance

efficient market hypothesis

public information

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Question 18

Multiple Choice

Which of the following is data that includes past stock prices and volume, financial statements, corporate news, analyst opinions, etc.?

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audited financial statements

generally accepted accounting principles

privately held information

public information

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Question 19

Multiple Choice

Which of these refers to something that has not been released to the public, but is known by few individuals, likely company insiders?

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audited financial statements

restricted stock

privately held information

insider trading

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Question 20

Multiple Choice

Investor enthusiasm causes an inflated bull market that drives prices too high, ending in a dramatic collapse in prices is known as

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behavior finance.

efficient market.

privately held information.

stock market bubble.

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