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43. The wider the dispersion of returns on a stock, the:
44. The variance of an investment's returns is a measure of the:
45. Which one of the following security classes has the highest standard deviation of
returns?
46. In a year in which common stocks offered an average return of 18%, Treasury bonds
offered 10%, and Treasury bills offered 7%. The risk premium for common stocks was:
47. Over a 20-year period an investment of $1,000 in common stocks returned an average of
11% in nominal terms and 4% in real terms. At the end of the 20 years, the portfolio value was:
48. A stock is expected to return 11% in a normal economy, 19% if the economy booms, and
lose 8% if the economy moves into a recessionary period. The economists predict a 65% chance
of a normal economy, a 25% chance of a boom, and a 10% chance of a recession. What is the
expected return on the stock?
49. When the annual rate of return on U.S. Treasury bills is historically high, investors expect
the risk premium on the stock market to be:
50. From a historical perspective (1900-2013), what would you expect to be the approximate
return on a diversified portfolio of common stocks in a year that Treasury bills offered 7.5%?
51. The appropriate opportunity cost of capital is the return that investors give up on
alternative investments that:
52. An estimation of the opportunity cost of capital for projects that have an "average" level
of risk is the rate of return on:
53. What is the approximate variance of returns if over the past 3 years an investment
returned 8%, -12%, and 15%?
54. What is the approximate standard deviation of returns if over the past 4 years an
investment returned 8%, -12%, -12%, and 15%?
55. The variance of a stock's returns can be calculated as the:
56. What is the variance of returns of a 3-stock portfolio (each stock being equally weighted)
that produced returns of 20%, 25%, and 30%?
57. What is the standard deviation of returns of a 4-stock portfolio (each stock being equally
weighted) that produced returns of 20%, 20%, 25%, and 30%?
58. What is the variance of returns of a 3-stock portfolio (with unequal weights 25%, 50%,
and 25%) that produced returns of 20%, 25%, and 30%, respectively?
59. If the standard deviation of a portfolio's returns is known to be 30%, then its variance is:
60. What is the standard deviation of a portfolio's returns if the mean return is 15%, the
variance of returns is 184, and there are three stocks in the portfolio?
61. What is the approximate standard deviation of returns for a one-year project that is
equally likely to return 100% as it is to provide a 100% loss?
62. What is the typical relationship between the standard deviation of an individual common
stock and the standard deviation of a diversified portfolio of common stocks?
63. The standard deviations of individual stocks are generally higher than the standard
deviation of the market portfolio because individual stocks:
64. The benefits of portfolio diversification are highest when the individual securities within
the portfolio have returns that:
65. The major benefit of diversification is the:
66. When high growth is expected in the economy, an investor should receive higher returns
from:
67. A firm is said to be countercyclical if its returns:
68. Industries that generally perform well when other industries are performing well are
referred to as:
69. What is the expected return on a portfolio that will decline in value by 13% in a recession,
will increase by 16% in normal times, and will increase by 23% during boom times if each
scenario has an equal likelihood of occurrence?
70. The higher the standard deviation of a stock's annual returns, the:
71. The incremental risk to a portfolio from adding another stock:
