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# fmt13 - Chapter 13 Return Risk and the Security Market Line...

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Chapter 13 Return, Risk, and the Security Market Line Chapter 13 Quiz A Student Name _________________________ Student ID ____________ ________ 1. Market risk is referred to as: a. diversifiable risk. b. total risk. c. systematic risk. d. asset specific risk. ________ 2. A rate of return that plots above the security market line: ________ 3. Which one of the following statements is an example of unsystematic risk? ________ 4. Which one of the following statements is correct? ________ 5. Asset A has an expected return of 12.5 percent and a beta of 1.15. What is the market’s reward-to-risk ratio if the risk-free rate is 3.9 percent? a. 7.48 percent b. 8.62 percent c. 9.90 percent d. 10.96 percent ________ 6. The risk-free rate of return is 4 percent and the expected return on the market is 13.5 percent. What is the expected return for a stock with a beta of 1.16? ________ 7. You own a portfolio which is 20 percent invested in U.S. Treasury bills, 30 percent invested in Stock A with a beta of 1.23, 10 percent invested in stock B with a beta of .95, and the remainder is invested in stock C. Stock C is equally as risky as the market. The risk-free rate of return is 4.2 percent and the expected return on the market is 11 percent. What is the portfolio beta? a. .66 b. .86 c. .96 d. 1.06 ________

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