MGNT 3125_Chapter 8_reviewquestions

MGNT 3125_Chapter 8_reviewquestions - MGNT 3125 Fall 2010...

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MGNT 3125 Fall 2010 Dr. Amine Khayati Chapter 8 Review questions 1 - An investor's portfolio is the ....................... the investor owns. The percentages of a portfolio's total value invested in each asset are the ................................ a- combination of assets; portfolio weights b- combination of assets; assets expected returns c- combination of voting rights; assets' expected variances d- dividend rights; securities expected returns 2 - The variance and standard deviation of a portfolio .............. equal to weighted averages of the corresponding characteristics of the individual securities. For most portfolios, the standard deviation is generally ............... the weighted average of the standard deviations of the securities in the portfolio. a- are not; more than b- are not; less than c- are; equal to d- are; less than 3 - The actual return on a security consists of two parts: the expected return and the unexpected return. The risk of an asset comes from the ........................ part. a- expected b- unexpected c- diversifiable d- unsystematic 4 - A .................... risk factor tends to affect a large number of assets to a greater or lesser degree. However, an ............... risk factor affects only a single or small group of assets. a- systematic; market b- systematic; non-diversifiable c- unsystematic; systematic d- systematic; unsystematic 5 - The process of investing is a portfolio of several assets to reduce risk is called ..................... . The standard deviation of a portfolio decreases as the number of securities in the portfolio ................ a- asset allocation; decrease b- diversification; increase c- diversification; decrease d- securitization; increase 1
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6 - Risk that is eliminated by diversification is .................... or ................... risk. However, there is a minimum level of risk in a portfolio of common stocks which cannot be eliminated by diversification; this minimum level is referred to as ......................... or ...................... risk. a- diversifiable - unsystematic; non-diversifiable - systematic b- diversifiable - systematic; non-diversifiable - unsystematic c- non-diversifiable - unsystematic; diversifiable - systematic d- non-diversifiable - systematic; diversifiable - unsystematic 7 - Which of the following best define the portfolio weight? a- The total market value of a portfolio divided by the total book value of that portfolio b- the total number of shares invested in a particular asset divided by the total number of shares held in a portfolio. c- The dividends payments divided by the total current market value of a portfolio d- the percentage of a portfolio's total value that is invested in a particular asset. 8 - In a fairly large portfolio, the ...................... risk associated with one stock typically has no impact on the portfolio total risk. In this case, it would be reasonable to expect that the effects of ..................... risk on various stocks would offset each other, thereby eliminating the risk to the investor arising from this source of risk.
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