FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 11: Risk and Return

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

Ben & Terry's has an expected return of 13.2 percent and a beta of 1.08.The expected return on the market is 12.4 percent.What is the risk-free rate?

A) 3.87 percent
B) 4.24 percent
C) 2.61 percent
D) 3.29 percent
E) 2.40 percent

F) B) and D)
G) A) and B)

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

The security market line is a linear function that is graphed by plotting data points based on the relationship between the:

A) risk-free rate and beta.
B) market rate of return and beta.
C) market rate of return and the risk-free rate.
D) risk-free rate and the market rate of return.
E) expected return and beta.

F) D) and E)
G) A) and C)

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

Julie wants to create a $5,000 portfolio.She also wants to invest as much as possible in a high risk stock with the hope of earning a high rate of return.However, she wants her portfolio to have no more risk than the overall market.Which one of the following portfolios is most apt to meet all of her objectives?

You own a stock that has an expected return of 15.72 percent and a beta of 1.33.The U.S.Treasury bill is yielding 3.82 percent and the inflation rate is 2.95 percent.What is the expected rate of return on the market?

The slope of the security market line represents the:

Which statement is correct?

For a risky security to have a positive expected return but less risk than the overall market, the security must have a beta:

Bernard Companies stock has an expected return of 9.5 percent.The stock is expected to return 11 percent in a normal economy and 13.4 percent in a boom.The probabilities of a recession, normal economy, and a boom are 10 percent, 84 percent, and 6 percent, respectively.What is the expected return if the economy is in a recession?

Consider the following information: What is the variance of a portfolio invested 25 percent each in Stocks A and B and 50 percent in Stock C?

Which one of the following is the computation of the risk premium for an individual security? E(R) is the expected return on the security, R_f is the risk-free rate, β is the security's beta, and E(R_M) is the expected rate of return on the market.

North Around, Inc.stock is expected to return 22percent in a boom, 13percent in a normal economy, and -15 percent in a recession.The probabilities of a boom, normal economy, and a recession are 6 percent, 92 percent, and 2 percent, respectively.What is the standard deviation of the returns on this stock?

Crabby Shores stock is expected to return 16 percent in a booming economy, 11.5 percent in a normal economy, and 1.8 percent in a recession.The probabilities of an economic boom, normal state, or recession are 6 percent, 85 percent, and 9 percent, respectively.What is the expected rate of return on this stock?

The common stock of The Dominic Companies should return 29 percent in a boom, 12 percent in a normal economy, and -15 percent in a recession.The probabilities of a boom, normal economy, and recession are 12percent, 86 percent, and 2 percent, respectively.What is the variance of the returns on this stock?

Which statement is correct?

Bernard Companies stock has an expected return of 10.75 percent.The stock is expected to return 13.5 percent in a normal economy and 19.6 percent in a boom.The probabilities of a recession, normal economy, and a boom are 5 percent, 80 percent, and 15 percent, respectively.What is the expected return if the economy is in a recession?

Which one of the following is the best example of unsystematic risk?

A stock has an expected return of 11.3 percent and a beta of 1.08.The risk-free rate is 4.7 percent.What is the slope of the security market line?

Which one of the following is the vertical intercept of the security market line?

Which one of the following portfolios will have a beta of zero?

The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent.Stock A has a beta of 1.1 and an expected return of 13.1 percent.Stock B has a beta of .86 and an expected return of 11.4 percent.Are these stocks correctly priced? Why or why not?