# ch11 - ch11 Student:

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Unformatted text preview: ch11 Student: _______________________________________________________________________________________ Multiple Choice Questions 1. In the equation R = + U, the three symbols stand for: A. average return, expected return, and unexpected return. B. required return, expected return, and unbiased return. C. actual total return, expected return, and unexpected return. D. required return, expected return, and unbiased risk. E. risk, expected return, and unsystematic risk. 2. The acronym APT stands for: A. Arbitrage Pricing Techniques. B. Absolute Profit Theory. C. Arbitrage Pricing Theory. D. Asset Puting Theory. E. Assured Price Techniques. 3. The acronym CAPM stands for: A. Capital Asset Pricing Model. B. Certain Arbitrage Pressure Model. C. Current Arbitrage Prices Model. D. Cumulative Asset Price Model. E. None of the above. 4. The unexpected return on a security, U, is made up of: A. market risk and systematic risk. B. systematic risk and idiosyncratic risk. C. idiosyncratic risk and unsystematic risk. D. expected return and market risk. E. expected return and idiosyncratic risk. 5. Systematic risk is defined as: A. a risk that specifically affects an asset or small group of assets. B. any risk that affects a large number of assets. C. any risk that has a huge impact on the return of a security. D. the random component of return. E. None of the above. 6. The term Corr( R , T ) = 0 tells us that: A. all error terms of company R and T are 0. B. the unsystematic risk of companies R and T is unrelated or uncorrelated. C. the correlation between the returns of companies R and T is -1. D. the systematic risk companies R and T is unrelated. E. None of the above. 7. A factor is a variable that: A. affects the returns of risky assets in a systematic fashion. B. affects the returns of risky assets in an unsystematic fashion. C. correlates with risky asset returns in a unsystematic fashion. D. does not correlate with the returns of risky assets in an systematic fashion. E. None of the above. 8. A security that has a beta of zero will have an expected return of: A. zero. B. the market risk premium. C. the risk free rate. D. less than the risk free rate but not negative. E. less than the risk free rate which can be negative. 9. Which of the following is true about the impact on market price of a security when a company makes an announcement and the market has discounted the news? A. The price will change a great deal; even though the impact is primarily in the future, the future value is discounted to the present. B. The price will change little, if at all, since the impact is primarily in the future. C. The price will change little, if at all, since the market considers this information unimportant....
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## This note was uploaded on 12/21/2011 for the course NIKA 101 taught by Professor Temur during the Spring '11 term at Acton School of Business.

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ch11 - ch11 Student:

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