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Unformatted text preview: 2201AFE Corporate Finance TOPICS: Some Lessons from Capital Market History Risk, Return and the Security Market Line 20 Multiple-Choice Questions 1. The excess return required from a risky asset over that required from a risk-free asset is called the: a. risk premium. b. geometric premium. c. excess return. d. average return. e. variance. 2. The average squared difference between the actual return and the average return is called the: a. volatility return. b. variance. c. standard deviation. d. risk premium. e. excess return. 3. The standard deviation for a set of stock returns can be calculated as the: a. positive square root of the average return. b. average squared difference between the actual return and the average return. c. positive square root of the variance. d. average return divided by N minus one, where N is the number of returns. e. variance squared. 4. A symmetric, bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the _____ distribution. a. gamma b. Poisson c. bi-modal d. normal e. uniform 5. The average compound return earned per year over a multi-year period is called the _____ average return. a. arithmetic b. standard c. variant d. geometric e. real 6. The return earned in an average year over a multi-year period is called the _____ average return. a. arithmetic b. standard c. variant d. geometric e. real 7. An efficient capital market is one in which: a. brokerage commissions are zero....
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This note was uploaded on 10/10/2010 for the course ECON 7300 at University of Sydney.