qL04 - Quiz for Lecture 4 1 You have developed the...

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Quiz for Lecture 4 1. You have developed the following data on three stocks: Stock Standard Deviation Beta A 0.15 0.79 B 0.25 0.61 C 0.20 1.29 As a risk minimizer, you would choose Stock if held in isolation and Stock if held as part of a well-diversified portfolio. a. A; A. b. A; B. c. B; C. d. C; A. e. C; B. 2. Which of the following statements is most correct? a. Market participants are able to eliminate virtually all market risk if they hold a large diversified portfolio of stocks. b. Market participants are able to eliminate virtually all company- specific risk if they hold a large diversified portfolio of stocks. 3. You have developed data which give (1) the average annual returns of the market for the past five years and (2) similar information on Stocks A and B. If these data are as follows, which of the possible answers best describes the historical beta for A and B? Years Market Stock A Stock B 1 0.03 0.16 0.05 2 -0.05 0.20 0.05 3 0.01 0.18 0.05 4 -0.10 0.25 0.05 5 0.06 0.14
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This note was uploaded on 10/03/2010 for the course FINANCE 08FB40447 taught by Professor Raymond during the Spring '10 term at University of Manchester.

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qL04 - Quiz for Lecture 4 1 You have developed the...

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