Finance Chapter 13

Of the options listed below, which is the best example of a diversifiable risk?

A firm's sales decrease

Assume you are an analyst monitoring Okello stock. Which one of the following would be reflected in Okello's expected return?

Assume you are an analyst monitoring Okello stock. Which one of the following would be reflected in Okello's expected return?

Buchi owns several financial instruments: stocks issued by seven different companies, plus bonds issued by four different companies. Her investments are best described as a(n):

Portfolio

The market risk premium equals the:

market rate of return minus the risk-free rate of return.

To calculate the expected risk premium on a stock, one must subtract the ________ from the stock's expected return.

risk-free rate

The expected return of a stock, based on the likelihood of various economic outcomes, equals the:

weighted average of the returns for each economic state.

When using economic probabilities to compute the expected return on a stock, the result is:

a mathematical expectation based on a weighted average and not a guaranteed outcome.