Exam 12: Return, Risk, and the Security Market Line

A stock has a standard deviation of 18.0% and a covariance with the market of .02. The market has a standard deviation of 14.3%. What is the beta of this stock?

Which one of the following terms is another name for systematic risk?

The reward-to-risk ratio is 6.0% and the risk-free rate is 1.4%. What is the expected return on a risky asset if the beta of that asset is 1.30?

Of the following, Stock ________ has the greatest level of total risk and Stock ________ has the highest risk premium. Stock Beta Standard deviation A 1.09 11\% B .96 13\% C 1.24 18\% D 1.13 26\% E .87 9\%

The stock of Healthy Eating, Inc., has a beta of 1.31. The risk-free rate is 1.12% and the market return is 12.32%. What is the expected return on Healthy Eating's stock?

Dinner Foods stock has a beta of 1.45 and an expected return of 13.43%. Edwards' Meals stock has a beta of .95 and an expected return of 10.27%. Assume that both stocks are correctly priced. Given this, the risk-free rate is ________% and the market rate of return is ________%.

Grace has one risk-free asset and one risky stock in her portfolio. The risk-free asset has an expected return of 1.2%. The risky asset has a beta of 1.5 and an expected return of 20.0%. What is the expected return on the portfolio if the portfolio beta is 1.05?

Farm Tractors, Inc., stock has a beta of 1.12 and an expected return of 12.8%. The risk-free rate is 3.84%. What is the market rate of return?

A risky asset has a beta of 1.30 and an expected return of 10.3%. What is the reward-to-risk ratio if the risk-free rate is 1.34%?

A portfolio consists of two stocks. Stock J accounts for 55% of the portfolio and has a beta of 1.43. Stock K has a beta of .63. What is the portfolio beta?

A portfolio is comprised of two stocks. Stock A comprises 65% of the portfolio and has a beta of 1.21. Stock B has a beta of .95. What is the portfolio beta?

What is the covariance of Security A to the market given the following information? Year Security A Returna Market Returns 1 18\% 10\% 2 -6 -2 3 9 7

Ann realized a total return of 15.3%, which is more than her expected return of 12.0%. What is the amount of her unexpected return?

Which two of the following determine how sensitive a security is relative to movements in the overall market? I. the standard deviation of the security II. correlation between the security's return and the market return III. the volatility of the security relative to the market IV. the amount of unsystematic risk inherent in the security

Where will a security plot in relation to the security market line (SML)if it is considered to be a good purchase because it is underpriced?

A portfolio of securities has a beta of 1.14. Given this, you know that:

What is the beta of an average asset?

According to the systematic risk principle, the reward for bearing risk is based on which one of the following types of risk?

A stock with which one of the following betas has an expected return that most resembles the overall market expected rate of return?

A portfolio consists of two stocks and has a beta of 1.20. The first stock has a beta of 1.02 and comprises 30% of the portfolio. What is the beta of the second stock?