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

Western Exports stock has a standard deviation of 15.6 percent and a covariance with the market of 0.0150.The market has a standard deviation of 13.7 percent.What is the correlation of this stock with the market?

All else held constant,which of the following will increase the expected return on a security based on CAPM? Assume the market return exceeds the risk-free rate and both values are positive.Also assume the beta exceeds 1.0. I.decrease in the security beta II.increase in the market risk premium III.decrease in the risk-free rate IV.increase in the market rate of return

You own a portfolio which is invested equally in two stocks and a risk-free security.The stock betas are 0.89 for Stock A and 1.26 for Stock B.Which one of the following will increase the portfolio beta,all else constant?

Home Interior's stock has an expected return of 13.25 percent and a beta of 1.4.The market return is 10.75 percent and the risk-free rate is 4.5 percent.This stock is ________ because the CAPM return for the stock is ________ percent.

What is the covariance of security A to the market given the following information?

A stock has a standard deviation of 18.0 percent and a covariance with the market of 0.02.The market has a standard deviation of 14.3 percent.What is the beta of this stock?

Which one of the following must be equal for two individual securities with differing betas if those securities are correctly priced according to the capital asset pricing model?

The following portfolio has an expected return of _____ percent and a beta of _____.

Which one of the following qualifies as diversifiable risk?

Which one of the following is most commonly used as the measure of the overall market rate of return?

The amount of risk premium allocated to Security A is dependent upon which one of the following?

Ann realized a total return of 12.8 percent which is more than her expected return of 11.5 percent.What is the amount of her unexpected return?

The security market line depicts the graphical relationship between which two of the following? I.expected return II.surprise return III.systematic risk IV.unsystematic risk

Uptown Markets stock has a standard deviation of 16.8 percent and a covariance with the market of 0.02.The market has a standard deviation of 13.7 percent.What is the correlation of this stock with the market?

A security has a zero covariance with the market.This means that:

Which one of the following statements applies to unsystematic risk?

Stock X has a beta of 0.88 and an expected return of 10.8 percent.Stock Y has a beta of 1.15 and an expected return of 13.1 percent.What is the risk-free rate of return assuming that both stock X and stock Y are correctly priced?

Which of the following correctly identifies the factors included in the Fama-French three-factor model?

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

Which one of the following is the type of risk that affects a large number of assets?