EMG3225 - FINAL EXAM Study Quizzes - Finance EMG3225...

Finance EMG3225 – Practice Quizzes for Final Exam
Chapter 7 – Risk and Return
1. The expected return and the
weighted average return from an
investment are always the same.
A.
True
B.
False
2. If an expected return of a
potential investment is negative,
then the standard deviation of the
risk associated with that
investment is negative.
3. Historically, the standard
deviation of the returns from
investing in large U.S. stocks has
been greater than the standard
deviation of the returns from
investing in small U.S. stocks.
4. The coefficient of variation is a
useful measure for comparing
between alternatives with
different expected returns and
different standard deviations.
5. Market risk is synonymous for
systematic risk.
A.
True
B.
False
6. The Security Market Line is the
graphic representation of the
Capital Asset Pricing Model.

7. Diversification provides a benefit
to investors when:
8. Which of the following is the best
measure of the risk of one asset's
returns?

9. A stock's beta is a measure of its:
A.
market risk
B.
unsystematic
risk
C.
unique
risk
D.
diversifiable
risk
10. The beta of a stock is the slope of: 11. A stock with a beta greater than
one has returns that are _____
volatile than the market and a
stock with a beta less than one has
returns that are _____ volatile
than the market.
12. Why is there a limit to the benefits
of diversification?

13. What is the expected return of the
following?
A
.
12.4%
B.
18.2
%
C.
12
%
D.
12%
.
14. If an investor were comparing
Asset Q, which has an expected
return of 6.5% and a standard
deviation of 4.3% to Asset U,
which has an expected return of
8.8% and a standard deviation of
5.5% and to Asset B, which has an
expected return of 8.8% and a
standard deviation of 6.5%, which
would she choose?