CH13AQZV7 - Chapter 13 Quiz A Student Name 1 Beta measures...

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Chapter 13 Quiz A Student Name _________________________ Student ID ____________ ________ 1. Beta measures _____ risk. a. diversifiable b. total c. systematic d. asset specific ________ 2. You own a portfolio which consists of 100 shares of stock A, 300 shares of stock B, and 250 shares of stock C. The market price of stock A is $34. The price of stock B is $18 and the price of stock C is $28. What is the portfolio weight of stock B? a. 29 percent b. 34 percent c. 37 percent d. 41 percent ________ 3. A stock that lies below the security market line: a. has too high of a return for the risk assumed. b. is correctly priced according to the Capital Asset Pricing Model. c. has too little risk for the return. d. is overpriced. ________4. The risk-free rate of return is 4.5 percent and the market risk premium is 8 percent. What is the expected return for a stock with a beta of 1.32? a. 9.28 percent b. 13.94 percent c. 15.06 percent d. 16.50 percent ________5. You own a portfolio which is evenly distributed among U.S. Treasury bills, Stock A with a beta of .84, stock B with a beta of 1.48, and stock C, which is equally as risky as the market. The risk-free rate of return is 4 percent and the expected return on the market is 10 percent. What is the beta of the portfolio? a. .58 b. .69 c. .83 d. 1.16 ________6. A portfolio is expected to return 7 percent in a normal economy, 14 percent in a boom economy, and lose 20 percent in a recessionary economy. The probability of a recession is 20 percent while the probability of a boom is 5 percent. What is the standard deviation of the portfolio? a. 7.89 percent b. 9.32 percent c. 10.87 percent d. 11.08 percent ________7. Which one of the following is an example of systematic risk? a. a fire destroys a local warehouse b. a financial executive skips town with the firm’s money c. the inflation rate increases by 5 percent d. restaurant chefs go on strike ________8. You have a $1,200 portfolio which is invested in two stocks and one risk-free asset. $300 is invested in stock A, which has a beta of 1.1. Stock B has a beta of .80. How much should be invested in the risk-free asset if you want to achieve a portfolio beta of .835? a. 5.0 percent b. 7.5 percent c. 9.0 percent d. 10.5 percent ________9. Which one of the following statements is correct? a. Standard deviation measures total risk. b. The higher the beta the lower the security’s risk premium. c. A portfolio needs to contain about 100 diverse securities before the benefits of diversification are noticeable. d. Actions by the Federal Reserve are an example of unsystematic risk. ________10. Given the following information, what is the expected return on a portfolio which is invested 40 percent in stock A and 60 percent in stock B? State of
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This note was uploaded on 05/29/2010 for the course FIN 325 taught by Professor Staff during the Spring '08 term at San Diego State.

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CH13AQZV7 - Chapter 13 Quiz A Student Name 1 Beta measures...

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