Question 1

a portfolio of three different stocks, which of the following could NOT be true?

Accepted Answer

A)  The riskiness of the portfolio is greater than the riskiness of one or two of the stocks. 
B)  The beta of the portfolio is less than the betas of each of the individual stocks. 
C)  The beta of the portfolio is greater than the beta of one or two of the individual stocks' betas. 
D)  The beta of the portfolio can not be equal to 1. 
E)  The riskiness of the portfolio is less than the riskiness of each of the stocks if they were held in isolation. 
A)  The riskiness of the portfolio is greater than the riskiness of one or two of the stocks. 
B)  The beta of the portfolio is less than the betas of each of the individual stocks. 
C)  The beta of the portfolio is greater than the beta of one or two of the individual stocks' betas. 
D)  The beta of the portfolio can not be equal to 1. 
E)  The riskiness of the portfolio is less than the riskiness of each of the stocks if they were held in isolation.

Question 2

SML relates required returns to firms' systematic (or market) riskThe slope and intercept of this line can be influenced by managerial actions.

Accepted Answer

A) True 
 B)False

Question 3

the returns of two firms are negatively correlated, then one of them must have a negative beta.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is CORRECT?

Accepted Answer

A)  The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry. 
B)  The slope of the characteristic line is the stock's standard deviation. 
C)  The distance of the plot points from the characteristic line is a measure of the stock's market risk. 
D)  The distance of the plot points from the characteristic line is a measure of the stock's diversifiable risk. 
E)  "Characteristic line" is another name for the Security Market Line. 
A)  The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry. 
B)  The slope of the characteristic line is the stock's standard deviation. 
C)  The distance of the plot points from the characteristic line is a measure of the stock's market risk. 
D)  The distance of the plot points from the characteristic line is a measure of the stock's diversifiable risk. 
E)  "Characteristic line" is another name for the Security Market Line.

a portfolio of three different stocks, which of the following could NOT be true?

SML relates required returns to firms' systematic (or market) riskThe slope and intercept of this line can be influenced by managerial actions.

the returns of two firms are negatively correlated, then one of them must have a negative beta.

Which of the following statements is CORRECT?

Overview

Risk and Return: Part I

Bonds

Stocks

Financial Options

Financial Analysis

Forecasting

Cost of Capital

Corporate Valuation

Capital Budgeting

Cash Flows and Risk

Real Options

Cap Structure

Cap Structure II

Dividends

Ipos, Invsmt Banking

Leasing

Hybrids

Working Capital

Derivatives

Bankruptcy, Reorganization, and Liquidation

Mergers

Filters

Exam 3: Risk and Return: Part II

a portfolio of three different stocks, which of the following could NOT be true?

SML relates required returns to firms' systematic (or market) riskThe slope and intercept of this line can be influenced by managerial actions.

the returns of two firms are negatively correlated, then one of them must have a negative beta.

Which of the following statements is CORRECT?

Overview

Risk and Return: Part I

Bonds

Stocks

Financial Options

Financial Analysis

Forecasting

Cost of Capital

Corporate Valuation

Capital Budgeting

Cash Flows and Risk

Real Options

Cap Structure

Cap Structure II

Dividends

Ipos, Invsmt Banking

Leasing

Hybrids

Working Capital

Derivatives

Bankruptcy, Reorganization, and Liquidation

Mergers

Filters