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42.
Which one of the following is most directly affected by the level of
systematic risk in a security?
43.
Which one of the following statements is correct concerning a portfolio
beta?
44.
The systematic risk of the market is measured by:
45.
At a minimum, which of the following would you need to know to estimate
the amount of additional reward you will receive for purchasing a risky asset
instead of a risk-free asset?
I. asset's standard deviation
II. asset's beta
III. risk-free rate of return
IV. market risk premium
46.
Total risk is measured by _____ and systematic risk is measured by _____.
47.
The intercept point of the security market line is the rate of return which
corresponds to:
48.
A stock with an actual return that lies above the security market line has:
49.
The market rate of return is 11 percent and the risk-free rate of return is 3
percent. Lexant stock has 3 percent less systematic risk than the market
and has an actual return of 12 percent. This stock:
50.
Which one of the following will be constant for all securities if the market is
efficient and securities are priced fairly?
51.
The reward-to-risk ratio for stock A is less than the reward-to-risk ratio of
stock B. Stock A has a beta of 0.82 and stock B has a beta of 1.29. This
information implies that:
52.
The market risk premium is computed by:
53.
The excess return earned by an asset that has a beta of 1.34 over that
earned by a risk-free asset is referred to as the:
54.
The _____ of a security divided by the beta of that security is equal to the
slope of the security market line if the security is priced fairly.
55.
The capital asset pricing model (CAPM) assumes which of the following?
I. a risk-free asset has no systematic risk.
II. beta is a reliable estimate of total risk.
III. the reward-to-risk ratio is constant.
IV. the market rate of return can be approximated.
56.
According to CAPM, the amount of reward an investor receives for bearing
the risk of an individual security depends upon the:
57.
Which one of the following should earn the most risk premium based on
CAPM?
58.
You want your portfolio beta to be 0.90. Currently, your portfolio consists of
$4,000 invested in stock A with a beta of 1.47 and $3,000 in stock B with a
beta of 0.54. You have another $9,000 to invest and want to divide it
between an asset with a beta of 1.74 and a risk-free asset. How much
should you invest in the risk-free asset?
59.
You have a $12,000 portfolio which is invested in stocks A and B, and a risk-
free asset. $5,000 is invested in stock A. Stock A has a beta of 1.76 and
stock B has a beta of 0.89. How much needs to be invested in stock B if you
want a portfolio beta of 1.10?
60.
You recently purchased a stock that is expected to earn 30 percent in a
booming economy, 9 percent in a normal economy, and lose 33 percent in a
recessionary economy. There is a 5 percent probability of a boom and a 75
percent chance of a normal economy. What is your expected rate of return
on this stock?
61.
The common stock of Manchester & Moore is expected to earn 13 percent
in a recession, 6 percent in a normal economy, and lose 4 percent in a
booming economy. The probability of a boom is 5 percent while the
probability of a recession is 45 percent. What is the expected rate of return
on this stock?
