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This document is a copyright document. It is solely for the use of course roster students in this particular course. It is NOT for distribution outside the course environment in any manner, for any reason, to any individual or group; past, present, or future. Redistribution or further posting in any form is considered a violation of the UAS Code of Conduct. BA 325 – F13 – Quiz – Chapter 6 Page 1 of 5 1. A typical measure for the risk-free rate of return is the ________. a. U.S. Treasury Bill rate b. prime lending rate c. money market rate d. short-term AAA-rated bond rate 2. If the Beta for stock A equals zero, then ________. a. stock A’s required return is equal to the required return on the market portfolio b. stock A’s required return is equal to the risk-free rate of return c. stock A has a guaranteed return d. stock A’s required return is greater than the required return on the market portfolio 3. An investor currently holds the following portfolio: Amount Invested 5,000 shares of Stock A $10,000 Beta = 1.8 10,000 shares of Stock B $30,000 Beta = 1.5 20,000 shares of Stock C $20,000 Beta = 1.2 The beta for the portfolio is ________. a. 1.371 b. 1.450 c. 1.500 d. 1.398 4. Stock A has an expected return of 14% with a standard deviation of 6%. If returns are normally distributed, then approximately two-thirds of the time the return on stock A will be ________. a. between 10% and 18% b. between 8% and 20% c. less than 8% d. between 6% and 14%
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This document is a copyright document. It is solely for the use of course roster students in this particular course. It is NOT for distribution outside the course environment in any manner, for any reason, to any individual or group; past, present, or future. Redistribution or further posting in any form is considered a violation of the UAS Code of Conduct. BA 325 – F13 – Quiz – Chapter 6 Page 2 of 5 5. Which of the following investments is clearly preferred to the others for an investor who is not holding a well-diversified portfolio? _ Investment k σ A 18% 20% B 20% 20% C 20% 22% a. Investment A b. Investment B c. Investment C d. cannot be determined without information regarding the risk-free rate of return 6. SeeBreeze Incorporated has a beta of 1.0. If the expected return on the market is 15%, what is the expected return on SeeBreeze Incorporated's stock? a. 15% b. 14% c. 18% d. cannot be determined without the risk free rate 7. Beta is a statistical measure of ________. a. unsystematic risk b. total risk c. the standard deviation d. the relationship between an investment's returns and the market return 8. You are considering investing in a project with the following possible outcomes: States Probability of Occurrence Investment Returns State 1: Economic boom 18% 20% State 2: Economic growth 42% 16% State 3: Economic decline 30% 3% State 4: Depression 10% -25% Calculate the expected rate of return and standard deviation of returns for this investment, respectively. a. 8.72%, 12.99% b. 7.35%, 12.99% c. 3.50%, 1.69% d. 2.18%, 1.69%
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