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

The common stock of Industrial Technologies has an expected return of 12.4 percent.The market return is 9.2 percent and the risk-free return is 3.87 percent.What is the stock's beta?

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(Multiple Choice)

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Question 1

Correct Answer:

Verified

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

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Question 2

Correct Answer:

Verified

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

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Question 3

Correct Answer:

Verified

Which one of the following is the theory which states that the value of a security is dependent upon the pure time value of money,the reward for bearing systematic risk,and the amount of systematic risk?

(Multiple Choice)

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Question 4

What is the beta of a risk-free security?

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Question 5

A portfolio beta is computed as which one of the following?

(Multiple Choice)

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Question 6

The slope of the security market line is equal to the:

(Multiple Choice)

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Question 7

Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases.

(Multiple Choice)

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Question 8

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

(Multiple Choice)

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Question 9

A portfolio is comprised of two stocks.Stock A comprises 65 percent of the portfolio and has a beta of 1.31.Stock B has a beta of .98.What is the portfolio beta?

(Multiple Choice)

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Question 10

A stock has a beta of 1.58 and an expected return of 16.2 percent.The risk-free rate is 3.8 percent.What is the market risk premium?

(Multiple Choice)

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Question 11

Stocks D,E,and F have actual reward-to-risk ratios of 7.1,6.8,and 7.4,respectively.Given this,you know for certain that:

(Multiple Choice)

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Question 12

Which one of the following is the best example of unsystematic risk?

(Multiple Choice)

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Question 13

Wilson Farms' stock has a beta of .84 and an expected return of 7.8 percent.The risk-free rate is 2.6 percent and the market risk premium is 6 percent.This stock is _ because the CAPM return for the stock is _ percent.

(Multiple Choice)

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Question 14

Explain the relationship between the security market line and market efficiency.

(Essay)

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Question 15

Western Exports stock has a standard deviation of 15.6 percent and a covariance with the market of .0150.The market has a standard deviation of 13.7 percent.What is the correlation of this stock with the market?

(Multiple Choice)

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Question 16

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

(Multiple Choice)

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Question 17

Retail Specialties just announced that its Chief Operating Officer is retiring at the end of this month.This announcement will cause the firm's stock price to:

(Multiple Choice)

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Question 18

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.

(Multiple Choice)

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Question 19

Which one of the following statements is true?

(Multiple Choice)

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Question 20

Showing 1 - 20 of 84

The common stock of Industrial Technologies has an expected return of 12.4 percent.The market return is 9.2 percent and the risk-free return is 3.87 percent.What is the stock's beta?

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

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

Which one of the following is the theory which states that the value of a security is dependent upon the pure time value of money,the reward for bearing systematic risk,and the amount of systematic risk?

What is the beta of a risk-free security?

A portfolio beta is computed as which one of the following?

The slope of the security market line is equal to the:

Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases.

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

A portfolio is comprised of two stocks.Stock A comprises 65 percent of the portfolio and has a beta of 1.31.Stock B has a beta of .98.What is the portfolio beta?

A stock has a beta of 1.58 and an expected return of 16.2 percent.The risk-free rate is 3.8 percent.What is the market risk premium?

Stocks D,E,and F have actual reward-to-risk ratios of 7.1,6.8,and 7.4,respectively.Given this,you know for certain that:

Which one of the following is the best example of unsystematic risk?

Wilson Farms' stock has a beta of .84 and an expected return of 7.8 percent.The risk-free rate is 2.6 percent and the market risk premium is 6 percent.This stock is _ because the CAPM return for the stock is _ percent.

Explain the relationship between the security market line and market efficiency.

Western Exports stock has a standard deviation of 15.6 percent and a covariance with the market of .0150.The market has a standard deviation of 13.7 percent.What is the correlation of this stock with the market?

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

Retail Specialties just announced that its Chief Operating Officer is retiring at the end of this month.This announcement will cause the firm's stock price to:

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 statements is true?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

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

The common stock of Industrial Technologies has an expected return of 12.4 percent.The market return is 9.2 percent and the risk-free return is 3.87 percent.What is the stock's beta?

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

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

Which one of the following is the theory which states that the value of a security is dependent upon the pure time value of money,the reward for bearing systematic risk,and the amount of systematic risk?

What is the beta of a risk-free security?

A portfolio beta is computed as which one of the following?

The slope of the security market line is equal to the:

Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases.

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

A portfolio is comprised of two stocks.Stock A comprises 65 percent of the portfolio and has a beta of 1.31.Stock B has a beta of .98.What is the portfolio beta?

A stock has a beta of 1.58 and an expected return of 16.2 percent.The risk-free rate is 3.8 percent.What is the market risk premium?

Stocks D,E,and F have actual reward-to-risk ratios of 7.1,6.8,and 7.4,respectively.Given this,you know for certain that:

Which one of the following is the best example of unsystematic risk?

Wilson Farms' stock has a beta of .84 and an expected return of 7.8 percent.The risk-free rate is 2.6 percent and the market risk premium is 6 percent.This stock is _____ because the CAPM return for the stock is _____ percent.

Explain the relationship between the security market line and market efficiency.

Western Exports stock has a standard deviation of 15.6 percent and a covariance with the market of .0150.The market has a standard deviation of 13.7 percent.What is the correlation of this stock with the market?

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

Retail Specialties just announced that its Chief Operating Officer is retiring at the end of this month.This announcement will cause the firm's stock price to:

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 statements is true?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

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

Wilson Farms' stock has a beta of .84 and an expected return of 7.8 percent.The risk-free rate is 2.6 percent and the market risk premium is 6 percent.This stock is _ because the CAPM return for the stock is _ percent.

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.