practice_chp10 - Quiz 3 Winter 07 Key Version #1 1. The...

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1 Quiz 3 Winter 07 Key Version #1 1. The beta of a security is calculated by: A dividing the covariance of the security with the market by the variance of the market. b. dividing the correlation of the security with the market by the variance of the market. c. dividing the variance of the market by the covariance of the security with the market. d. dividing the variance of the market by the correlation of the security with the market. e. None of the above. Difficulty level: Easy Ross - Chapter 10 #14 Topic: SECURITY BETA 2. Risk that affects at most a small number of assets is called _____ risk. a. portfolio b. undiversifiable c. market d. total E unsystematic Difficulty level: Easy Ross - Chapter 10 #4 Topic: UNSYSTEMATIC RISK 3. The excess return required from a risky asset over that required from a risk-free asset is called the: a. variance. b. geometric premium. c. average return. d. excess premium. E risk premium. Difficulty level: Easy Ross - Chapter 09 #1 Topic: RISK PREMIUM 4. The combination of the efficient set of portfolios with a riskless lending and borrowing rate results in: a. the Capital Market Line which shows that all investors will only invest in the riskless asset. B the Capital Market Line which shows that all investors will invest in a combination of the riskless asset and the tangency portfolio. c. the Security Market Line which shows that all investors will invest in the riskless asset only. d. the Security Market Line which shows that all investors will invest in a combination of the riskless asset and the tangency portfolio. e. None of the above. Difficulty level: Medium Ross - Chapter 10 #49 Topic: CAPITAL MARKET LINE
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2 5. Which one of the following is the best example of a nondiversifiable risk? a. a poorly managed firm suddenly goes out of business due to lack of sales b. a well managed firm reduces its work force and automates several jobs c. a well respected president of a firm suddenly resigns
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practice_chp10 - Quiz 3 Winter 07 Key Version #1 1. The...

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