Chapter 07 MC

# Chapter 07 MC - CHAPTER SEVEN Multiple Choice Questions...

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CHAPTER SEVEN Multiple Choice Questions 7-1. The expected return on an investment is: a. equal to the required return b. less than the required return c. equivalent to the actual return d. the mean of the distribution of possible returns 7-2. A good measure of an investor’s risk exposure if she/he only holds a single asset in her portfolio is: a. the standard deviation of possible returns on the asset b. the expected value of the asset’s returns c. the correlation coefficient with the market portfolio d. the normal probability distribution function 7-3. Standard deviation is a: a. numerical indicator of how widely dispersed possible values are distributed around the mean b. numerical indicator of how widely dispersed possible values are distributed around the coefficient of variation c. numerical indicator of how widely dispersed possible values are distributed around the correlation coefficient d. measure of the relative risk of one asset compared with another 7-4. In terms of risk, labor union disputes, entry of a new competitor, and embezzlement by management are all examples of factors affecting: a. diversifiable risk b. market risk c. systematic risk d. company specific risk that cannot be diversified away 7-5. If the distribution of possible future sales values is normal, then the probability that actual sales will be the expected calculated value plus or minus one standard deviation is approximately? a. 50% b. 95% c. 68% d. 30% 79

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What is the standard deviation of the following income statement sales projection given the following information? Possible Sales Level (in 000’s) Probability 0 10% 100 15% 400 40% 450 30% 600 5% a. \$169.26 b. \$340 c. \$387.50 d. \$400 7-7. What is the coefficient of variation of the following income statement sales projection given the following information? Possible Sales Level (in 000’s) Probability 1000 10% 2000 15% 2500 50% 2800 20% 3000 5% a. 1.41 b. .22 c. 12% d. 18.2x 7-8. What is the expected return given the following information? Possible Returns
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## This note was uploaded on 01/21/2011 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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Chapter 07 MC - CHAPTER SEVEN Multiple Choice Questions...

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