Ch8 Quiz - 1. Question : It is usually considered that...

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1. Question : It is usually considered that diversification will normally reduce the riskiness of a portfolio of stocks. Student Answer: True False Points Received: 4 of 4 Comments: 2. Question : Risk-averse investors require higher rates of return on investments whose returns are highly uncertain, and most investors are risk averse. Student Answer: True False Points Received: 4 of 4 Comments: 3. Question : Variance is a measure of the variability of returns, and since it involves squaring the deviation of each actual return from the expected return, it is always larger than its square root, its standard deviation. Student Answer: True False Points Received: 0 of 4 Comments: 4. Question : Most corporations earn returns for their stockholders by acquiring and operating tangible and intangible assets. The relevant risk of each such asset should be measured in terms of its effect on the risk of the firm's stockholders. Student Answer: True
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False Points Received: 4 of 4 Comments: 5. Question : In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are really interested in ex ante (future) data. Student Answer: True False Points Received: 4 of 4 Comments: 6. Question : A stock with a beta equal to -1.0 has zero systematic (or market) risk. Student Answer: True False Points Received: 5 of 5 Comments: 7. Question : Bad managerial judgments or unforeseen negative events that happen to a firm are defined as "company- specific," or "unsystematic," events, and their effects on investment risk can in theory be diversified away. Student Answer: True False Points Received: 5 of 5 Comments:
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8. Question : A stock's beta measures its diversifiable risk relative to the diversifiable risks of other firms. Student Answer: True False Points Received: 0 of 5 Comments: 9. Question : Stock X has a beta of 0.5 and Stock Y has a beta of 1.5. Which of the following statements must be true, according to the CAPM? Student Answer: If you invest $50,000 in Stock X and $50,000 in Stock Y, your 2-stock portfolio would have a beta significantly lower than 1.0, provided the returns on the two stocks are not perfectly correlated.
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This note was uploaded on 03/27/2011 for the course FIN 2301 taught by Professor Jones during the Spring '11 term at Dallas Colleges.

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Ch8 Quiz - 1. Question : It is usually considered that...

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