FIN 571 Wk 5 - Practice: Wk 5 Practice Questions

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FIN 571 Wk 5 - Practice: Wk 5 Practice Questions

Periods of market decline are called:

Multiple Choice

•      discount factors.
•      bull markets.
•      coupons.
•      bear markets.

Over the past 4 years an investment returned 18%, −9%, −12%, and 15%. What is the standard deviation of returns?

Multiple Choice

•      9.2%
•      10.36%
•      11.2%
•      13.6%

The variance of an investment's returns is a measure of the:

Multiple Choice

•      volatility of the rates of return.
•      probability of a negative return.
•      historic return over long time periods.
•      average value of the investment.

Risks that are peculiar to a single firm:

Multiple Choice

•      are called market risks
•      cannot be diversified away
•      are called specific risks
•      tend to cause stocks to move together

Which one of the following risks is most important to a well-diversified investor in common stocks?

Multiple Choice

•      Market risk
•      Specific risk
•      Unsystematic risk
•      Diversifiable risk

Suppose that the Treasury bill rate is 9% rather than 5%, as we assumed in Table 12.1, and the expected return on the market is 10%. Use the betas in that table to answer the following questions.

If the expected rate of return on the market portfolio is 12% and T-bills yield 4%, what must be the beta of a stock that investors expect to return 9%? (Round your answer to 4 decimal places.)