Return,risk,and The Security Market Line

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Question 1

Free

Multiple Choice

Which one of the following is the type of risk that affects a large number of assets?

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unique

systematic

asset-specific

unsystematic

firm-specific

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Question 2

Free

Multiple Choice

Which one of the following is the type of risk that only affects either a single firm or just a small number of firms?

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unexpected

market

systematic

unsystematic

expected

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Question 3

Free

Multiple Choice

According to the systematic risk principle,the reward for bearing risk is based on which one of the following types of risk?

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unsystematic

firm specific

expected

systematic

diversifiable

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Question 4

Free

Multiple Choice

Which one of the following measures systematic risk?

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beta

alpha

variance

standard deviation

correlation coefficient

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Question 5

Free

Multiple Choice

The security market line depicts the graphical relationship between which two of the following?
I)expected return
II)surprise return
III)systematic risk
IV)unsystematic risk

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I and III

I and IV

II and III

II and IV

none of these

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Question 6

Multiple Choice

Which one of the following is expressed as "E(R_M)- R_f"?

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market risk premium

individual security risk premium

real rate of return

total expected rate of return

market rate of return

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Question 7

Multiple Choice

Which one of the following is the theory which states that the value of a security is dependent upon the pure time value of money,the reward for bearing systematic risk,and the amount of systematic risk?

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reward-to-risk theory

capital asset pricing model

risk premium proposal

market slope hypothesis

security market line proposition

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Question 8

Multiple Choice

Which one of the following terms is the measure of the tendency of two things to move or vary together?

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variance

squared deviation

standard deviation

alpha

covariance

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Question 9

Multiple Choice

Retail Specialties just announced that its Chief Operating Officer is retiring at the end of this month.This announcement will cause the firm's stock price to:

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increase.

either increase or remain constant.

remain constant.

decrease.

either increase, decrease, or remain constant.

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Question 10

Multiple Choice

Which one of the following is the best example of a risk associated with stock ownership?

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The stock paid a regular quarterly dividend.

The firm's net income decreased by 4 percent for the quarter, as had been expected.

One of the firm's patent applications was unexpectedly rejected.

The firm's cost of debt increased as the result of an expected tax cut.

The firm's production costs increased in line with previous years.

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Question 11

Multiple Choice

Which one of the following announcements is most apt to cause the price of a firm's stock to increase?

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The firm met its quarterly earnings forecast.

An unpopular CEO unexpectedly announced he is resigning effective immediately.

A firm officially confirmed the rumors that it is merging with a competitor.

The firm just lowered its projected earnings per share for next year.

Analysts are expected to lower the firm's credit rating on its debt.

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Question 12

Multiple Choice

Which one of the following terms is another name for systematic risk?

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unique risk

firm risk

market risk

asset-specific risk

diversifiable risk

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Question 13

Multiple Choice

Which one of the following is the best example of systematic risk?

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there is a shortage of nurses

a fire destroys a warehouse

gas prices rise sharply

the cost of sugar increases

two firms merge their operations

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Question 14

Multiple Choice

Which one of the following statements applies to unsystematic risk?

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It can be eliminated through portfolio diversification.

It is also called market risk.

It is a type of risk that applies to most, if not all, securities.

Investors receive a risk premium as compensation for accepting this risk.

This risk is related to expected returns.

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Question 15

Multiple Choice

Which one of the following is the best example of unsystematic risk?

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decrease in company sales

increase in market interest rates

change in corporate tax rates

increase in inflation

This risk is related to expected portfolio returns

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Question 16

Multiple Choice

Which one of the following qualifies as diversifiable risk?

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market risk

systematic risk associated with an individual security

market crash

the systematic portion of an expected return

the unsystematic portion of an unexpected return

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Question 17

Multiple Choice

Which one of the following betas represents the greatest level of systematic risk?

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.05

.68

1.00

1.19

1.27

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Question 18

Multiple Choice

A stock with which one of the following betas has an expected return that most resembles the overall market expected rate of return?

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.33

.74

.99

1.06

1.22

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Question 19

Multiple Choice

What is the beta of a risk-free security?

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.00

.50

1.00

1.50

2.00

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Question 20

Multiple Choice

Which one of the following stocks has the highest expected risk premium?

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Return,risk,and The Security Market Line

Which one of the following is the type of risk that affects a large number of assets?

Which one of the following is the type of risk that only affects either a single firm or just a small number of firms?

According to the systematic risk principle,the reward for bearing risk is based on which one of the following types of risk?

Which one of the following measures systematic risk?

The security market line depicts the graphical relationship between which two of the following?I)expected returnII)surprise returnIII)systematic riskIV)unsystematic risk

Which one of the following is expressed as "E(RM)- Rf"?

Which one of the following is the theory which states that the value of a security is dependent upon the pure time value of money,the reward for bearing systematic risk,and the amount of systematic risk?

Which one of the following terms is the measure of the tendency of two things to move or vary together?

Retail Specialties just announced that its Chief Operating Officer is retiring at the end of this month.This announcement will cause the firm's stock price to:

Which one of the following is the best example of a risk associated with stock ownership?

Which one of the following announcements is most apt to cause the price of a firm's stock to increase?

Which one of the following terms is another name for systematic risk?

Which one of the following is the best example of systematic risk?

Which one of the following statements applies to unsystematic risk?

Which one of the following is the best example of unsystematic risk?

Which one of the following qualifies as diversifiable risk?

Which one of the following betas represents the greatest level of systematic risk?

A stock with which one of the following betas has an expected return that most resembles the overall market expected rate of return?

What is the beta of a risk-free security?

Which one of the following stocks has the highest expected risk premium?

The security market line depicts the graphical relationship between which two of the following?
I)expected return
II)surprise return
III)systematic risk
IV)unsystematic risk

Which one of the following is expressed as "E(R_M)- R_f"?