chap6_exercise - A) optimal risky portfolio B) risk-free...

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Chapter 6 Selected Problems: From textbooks 1, P191 #3 2, P193 #6 3, P193 #7 4, P193 #9 Additional multiple choice questions: 1. Risk that can be eliminated through diversification is called ______ risk. A) unique B) firm-specific C) diversifiable D) all of the above 2. The _______ decision should take precedence over the _____ decision. A) asset allocation, stock selection B) choice of fad, mutual fund selection C) stock selection, asset allocation D) stock selection, mutual fund selection 3. Asset A has an expected return of 15% and a reward-to-variability ratio of .4. Asset B has an expected return of 20% and a reward-to- variability ratio of .3. A risk-averse investor would prefer a portfolio using the risk-free asset and _______. A) asset A B) asset B C) no risky asset D) can't tell from the data given
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4. An investor's degree of risk aversion will determine his _______.
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Unformatted text preview: A) optimal risky portfolio B) risk-free rate C) mix of risk-free asset and optimal risky asset D) choice of risk free asset 5. The ________ is equal to the square root of the systematic variance divided by the total variance. A) covariance B) correlation coefficient C) standard deviation D) reward-to-variability ratio 6. The _________ could be used in an index model to represent common or systematic risk factors. A) firm size B) industry C) S&P500 index D) capital allocation line 7. The variance of a portfolio of risky securities is __________. A) the sum of the securities' covariances B) the sum of the securities' variances C) the weighted sum of the securities' covariances D) the weighted sum of the securities' variances 8. Beta is a measure of __________. A) firm specific risk B) diversifiable risk C) market risk D) unique risk...
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This note was uploaded on 05/10/2008 for the course FIN 367 taught by Professor Han during the Spring '08 term at University of Texas at Austin.

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chap6_exercise - A) optimal risky portfolio B) risk-free...

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