| Online Exam 8 |
| Question 1 | 0 / 5 points |
Which of the statements below is true?
Question options:
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| Investors want to maximize return and maximize risk. | ||
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| Investors want to maximize return and minimize risk. (*This is correct) | ||
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| Investors want to minimize return and maximize risk. | ||
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| Investors want to minimize return and minimize risk. | ||
| Question 2 | 5 / 5 points | ||
The practice of not putting all of your eggs in one basket is an illustration of:
Question options:
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| variance. | ||
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| diversification. | ||
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| portion control. | ||
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| expected return. | ||
| Question 3 | 5 / 5 points | ||
The security market line has:
Question options:
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| a positive slope. | ||
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| a negative slope. | ||
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| no slope. | ||
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| a beta of 1.0. | ||
| Question 4 | 5 / 5 points | ||
Given an expected market return of 12.0%, a beta of 0.75 for Benson Industries, and a risk-free rate of 4%, what is the expected return for Benson Industries?
Question options:
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| 13% | ||
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| 10% | ||
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| 9% | ||
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| 4% | ||
| Question 5 | 5 / 5 points | ||
For most stocks, the correlation coefficient with other stocks is:
Question options:
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| positive. | ||
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| negative. | ||
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| zero. | ||
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| The distribution of correlation coefficients between stocks is uniform from -1.0 to +1.0. | ||
| Question 6 | 5 / 5 points | ||
Stocks A, B, C, and D have standard deviations, respectively, of 20%, 5%, 10%, and 15%. Which one is the riskiest?
Question options:
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| Stock A | ||
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| Stock B | ||
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| Stock C | ||
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| Stock D | ||
| Question 7 | 5 / 5 points | ||
Travis bought a share of stock for $31.50 that paid a dividend of $.85 and sold six months later for $27.65. What was his dollar profit or loss and holding period return?
Question options:
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| -$3.00, -9.52% | ||
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| -$3.85, -12.22% | ||
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| -$.85, -2.70% | ||
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| -$3.85, -9.52% | ||
| Question 8 | 5 / 5 points | ||
__________ may be defined as a measure of uncertainty in a set of potential outcomes for an event in which there is a chance for some loss.
Question options:
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| Diversification | ||
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| Risk | ||
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| Uncertainty | ||
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| Collaboration | ||
| Question 9 | 5 / 5 points | ||
The __________ is the intercept on the security market line.
Question options:
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| prime rate | ||
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| risk-free rate | ||
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| market rate of return | ||
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| beta | ||
| Question 10 | 5 / 5 points | ||
Which of the following investments is considered to be default risk-free?
Question options:
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| Currency options | ||
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| AAA-rated corporate bonds | ||
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| Common stock | ||
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| Treasury bills | ||
| Question 11 | 5 / 5 points | ||
Correlation, a standardized measure of how stocks perform relative to one another in different states of the economy, has a range from:
Question options:
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| 0.0 to +10.0. | ||
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| 0.0 to +1.0. | ||
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| -1.0 to +1.0. | ||
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| There is no range; correlation is a calculated number that can take on any value. | ||
| Question 12 | 5 / 5 points | ||
Jarvis bought a share of stock for $15.75 that paid a dividend of $.45 and sold three months later for $18.65. What was his dollar profit or loss and holding period return?
Question options:
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| $2.90, 18.41% | ||
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| $3.35, 21.27% | ||
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| -$2.90, -18.41% | ||
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| $.45, 2.86% | ||
| Question 13 | 5 / 5 points | ||
Find the variance for a security that has three one-year returns of 5%, 10%, and 15%.
Question options:
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| 10% | ||
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| 16.67% | ||
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| 25% | ||
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| 30% | ||
| Question 14 | 5 / 5 points | ||
Find the variance for a security that has three one-year returns of -5%, 15%, and 20%.
Question options:
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| 175% | ||
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| 75% | ||
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| 58.33% | ||
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| 25% | ||
| Question 15 | 5 / 5 points | ||
Use the following table:
| States of the Economy | Probability of the State | 3-Month T-Bill | Large-Company Stock | Small-Company Stock |
| Boom | 0.3 | 4 | 10 | 30 |
| Steady | 0.5 | 4 | 5 | 20 |
| Recession | 0.2 | 4 | 0 | 10 |
What is the difference between the variances for large- and small-company stocks?
Question options:
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| 40.25% | ||
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| 36.75% | ||
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| 27.30% | ||
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| 14.90% | ||
| Question 16 | 5 / 5 points | ||
The correlation coefficient, a measurement of the comovement between two variables, has what range?
Question options:
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| From 0.0 to +10.0 | ||
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| From 0.0 to +1.0 | ||
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| From -1.0 to +10.0 | ||
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| From =1.0 to -1.0 | ||
| Question 17 | 0 / 5 points | ||
| Stock | A | B | C | D |
| Expected Return | 5% | 5% | 7% | 6% |
| Standard Deviation | 10% | 12% | 12% | 11% |
Which of the following statements is true?
Question options:
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| A is a better investment than B. | ||
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| B is a better investment than C. | ||
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| C is a better investment than D. | ||
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| D is a better investment than C. | ||
| Question 18 | 5 / 5 points | ||
Unsystematic risk:
Question options:
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| is also known as nondiversifiable risk. | ||
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| can be diversified away. | ||
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| is system-wide risk. | ||
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| is equal to 2 times the systematic risk. | ||
| Question 19 | 5 / 5 points | ||
Which of the following statements is true about variance?
Question options:
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| Variance describes how spread out a set of numbers or values are around its mean or average. | ||
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| Variance is essentially the variability from the average. | ||
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| The larger the variance, the greater the dispersion. | ||
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| All of the above statements are true. | ||
| Question 20 | 5 / 5 points | ||
Assume the following information about the market and JumpMasters' stock. JumpMasters' beta = 1.50, the risk-free rate is 3.5%, the market risk premium is 10%. Using the SML, what is the expected return for JumpMasters' stock?
Question options:
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| 7.5% |
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| 13.5% |
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| 18.5% |
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| 27%
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