Quizbuilder Week 9

A risk that at most affects a small number of assets is a _______________.

Unsystematic risk

____________________ is a risk that affects at most a small number of assets.

Unsystematic risk

If you own an asset that is worth $1,500 and another asset that is worth $5,000. What is the portfolio weight in the first asset? a. .77 b. 77% c. .23 d. .25

.23

if you own an asset that is worth $1,500 and another asset that is worth $5,000. What is the portfolio weight in the second asset? a. .5 b. .77 c. 50% d. .23

.77

You own a portfolio that has $5,000 worth of stock A and $8,000 worth of stock B. If the expected returns on these stocks are 5 and 7 percent, respectively, what is the expected return on the portfolio? a. 7.55% b. 8.11% c. 6.55% d. 6.23%

6.23%

A portfolio is a: a. A group of assets such as stocks and bonds help by an investor b. Expected returns on a stock. c. A spread of risk across a number of assets. d. Diversified stock rates.

A group of assets such as stocks and bonds help by an investor

8. An example of an unsystematic risk announcement would be: a. Announcement about interests rates b. An oil strike by a company which is unlikely to have an effect on the world oil market c. Announcements about GDP d. News about a company's research and specific sales interests.

An oil strike by a company which is unlikely to have an effect on the world oil market

The systematic risk of an asset is measured by its ______________.

Beta Coefficient

Amount of systematic risk present in a particular risky asset relative to that in an average risky asset is called _______

Beta coefficient

__________ is an amount of systematic risk present in a particular risk asset relative to that in an average risky asset.

Beta coefficient

The minimum required return for an investment is often called the ____________.

Cost of capital

The minimum required return is often called the ______

Cost of capital

9. As the number of stocks in a portfolio grows the portfolios standard deviation of annual returns a. Stays the same b. Increases c. Decreases

Decreases

9. A relatively large portfolio has almost no unsystematic risk because of: a. Variability b. Market fluctuations c. Diversification d. Company-specific events

Diversification

Return on a risky asset expected in the future is a(n): a. Premium risk return b. Expected return c. Risk return d. High-Risk return

Expected Return

6. An announcement can be broken into two parts: a. Expected part and surprise b. Anticipated part and luck c. Forecast and timing d. Innovation and statistics

Expected part and surprise

An announcement can be expressed by the formula: Announcement = ____________+ ________:

Expected part, Surprise.

Return on a risky asset expected in the future is called . a. Portfolio weights b. Variance c. Mean d. Expected return

Expected return

Total return = ___________ + ___________ a. Expected return + Unexpected return b. Expected return - Unexpected return c. Unexpected return - Expected return d. Systematic risk + unsystematic risk

Expected return + Unexpected return

Return on a stock is expressed by the formula: Total return = ___________ + ______________

Expected return, Unexpected return

The security market line (SML) is a straight line displaying the relationship between __________ and ________. a. Risk, rate b. Variance, beta c. Expected return, risk d. Expected return, beta

Expected return, beta

7. Systematic Risk is also known as: a. Unique risk b. Asset-specific risk c. Market risk d. Diversifiable risk

Market risk

After ___, the ___ is arguably the most important concept in modern finance.

NPV , SML

The portfolio weigh is a measure of the portfolios _______________ in each stock. a. Risk-rate b. Percentage c. Value d. Variance

Percentage

____________ is the percentage of a portfolio's total value in a particular asset.

Portfolio weight

___________ of ___________ is the idea that spreading an investment across many assets will eliminate some of the risk.

Principle of diversification

The _________________________________ tells us that spreading an investment across many assets will eliminate some of the risk.

Principle of diversification.

The formula to determine the Risk Premium is:: a. Risk Premium = Risk-free rate ÷ Probability b. Risk Premium = Expected Return * Risk c. Risk Premium = Expected Return - Risk-free rate d. Risk Premium = Expected Return + Risk-free rate

Risk Premium = Expected Return = Expected Return - Risk-free Rate

7. What graphed line shows the relationship between expected return and beta a. Risk premium b. Security market c. Risk-to-reward d. Standard deviation

Security market

10. The capital asset pricing model shows that the expected return for a particular asset depends on these things except for: a. Pure time value of money b. Reward for bearing systematic risk c. Amount of systematic risk d. Similar assets for comparison

Similar assets for comparison

8. In a substantially diversified portfolio, what risk can be eliminated a. Unsystematic risk b. Expected return c. Systematic risk d. Risk premium

Systematic risk

A stocks beta coefficient is a measure of a. Total return b. Systematic risk c. Total risk d. Unsystematic risk

Systematic risk

Chapter 11 Fill-in-the-blank ____________________ is a risk that influences a large number of assets.

Systematic risk

10. The beta of a portfolio of stock A and Stock B is equal to a. weightA*ßB + weightB*ßA b. E(R)A*ßA + E(R)B*ßB c. ßB*σB + ßA*σA d. weightA*ßA + weightB*ßB

weightA*ßA + weightB*ßB

The process of spreading an investment across assets is called? a diversification b diversifiable risk c SML d unsystematic risk

{diversification

Unsystematic risk is sometimes called ___________

asset-specific risk.

The minimum required return is often called the: a cost of capital b The basic Idea c the SML d The fundamental result

cost of capital

The standard deviation _______ as the number of securities is increased.

declines

A common way of saying that an announcement isn't news is to say that the market has already_______ the announcement.

discontinued

The terms ______ and _____ are often used interchangeably

diversifiable risk, unsystematic risk

The Risk Premium is the difference between the __________ and the risk-free rate.

expected return

Systematic risk is sometimes called ___________

market risk.

_________ is a group of assets such as stocks and bonds held by an investor.

portfolio

The most convenient approach is to list the percentages of the total portfolio's value that are invested in each portfolio asset. These are called? a portfolio weights b portfolio expected returns c Portfolio variance d Standard deviation

portfolio weights

Spreading an investment across many assets will eliminate some of the risk. This is called? a principle of diversification b Unsystematic Risk c systematic risk principle d diversifiable risk

principle of diversification

The _____________ tells us that spreading an investment across a number of assets will eliminate some, but not all, of the risk.

principle of diversification

The ________ states that the reqard for bearing risk depends only on the systematic risk of an investment

system risk principle

A risk that influences a large number of assets is known as _______ risk.

systematic or market

Beta coefficient is an amount of _____________ present in a particular risk asset relative to that in an average risky asset.

systematic risk