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

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

Which one of the following betas represents the greatest level of systematic risk?

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

What is the beta of an average asset?

Which one of the following has the highest expected risk premium?

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

Laura has one risk-free asset and one risky stock in her portfolio.The risk-free asset has an expected return of 3.2 percent.The risky asset has a beta of 1.3 and an expected return of 14.9 percent.What is the expected return on the portfolio if the portfolio beta is .975?

The market has a standard deviation of 10.8 percent (0.108)while a risky security has a standard deviation of 22.5 (0.225)percent.The covariance of the stock with the market is .0149.What is the beta of the stock?

The market has an expected return of 11.4 percent and a risky asset with a beta of 1.18 has an expected return of 13 percent.Based on this information,what is the pure time value of money?

Which one of the following terms is the measure of the tendency of two things to move or vary together?

What is the beta of a portfolio which consists of the following?

Which one of the following announcements is most apt to cause the price of a firm's stock to increase?

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

Identify and describe each of the three components of a security's expected return according to the capital asset pricing model.

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

According to the capital asset pricing model,which of the following will increase the expected rate of return on a security that has a beta that is less than that of the market? Assume the market rate of return is greater than the risk-free rate and both rates are positive. I.increase in the risk-free rate II.decrease in the risk-free rate III.increase in the market risk premium IV.decrease in the market rate of return

You own three stocks which have betas of 1.16,1.34,and 1.02.You would like to add a fourth security such that your portfolio beta will match that of the market.Given this situation,the new security:

Which one of the following statements applies to unsystematic risk?

The reward-to-risk ratio is 6.8 percent and the risk-free rate is 5.3 percent.What is the expected return on a risky asset if the beta of that asset is 1.03?

The risk-free rate is 3.0 percent and the expected return on the market is 9 percent.Stock A has a beta of 1.20.For a given year,Stock A returned 12.5 percent while the market returned 9.75 percent.The systematic portion of Stock A's unexpected return was _____ percent and the unsystematic portion was _____ percent.