fin chapter 11

Which of the following statements is (are) true about variance?

- Variance is a measure of the squared deviations of a security's return from its expected return. - Standard deviation is the square root of variance.

return on a portfolio is a combination of the expected returns on the assets in the portfolio.

Expected

True or false: The standard deviation is the variance squared.

False

Which of the following are examples of information that may impact the risky return of a stock?

- The Fed's decision on interest rates at their meeting next week - The outcome of an application currently pending with the Food and Drug Administration.

suprise

The _____ is the news that influences the unanticipated return on the stock.

False

True or false: Expected return and inflation are the two components of risky return in the total return equation.

true

True or false: The expected return is the return that an investor expects to earn on a risky asset in the future.

Fasle

True or false: The expected return of a portfolio is a combination of the weights of each asset in a portfolio.

If you wish to create a portfolio of stocks, what is the required minimum number of stocks?

You must invest in stocks of more than one corporation.

True or false: Portfolio weights can be defined as the dollars invested in each asset.

false

True or false: The surprise part of any announcement is the information the market uses to form the expectation of the return on the stock.

false

systemactics

risk is the only risk important to the well diversified investor.

The return expected on an investment depends only on the asset's _____ risk.

syste

If the standard deviation of a portfolio is __________?

the square root of the variance