Risk and Return-Finance 3312

will be greater than or equal to .74 but less than or equal to 1.51.

A portfolio is comprised of 35 securities with varying betas. The lowest beta for an individual security is .74 and the highest of the security betas of 1.51. Given this information, you know that the portfolio beta:

Stock prices should respond only to the expected news and events

If the financial markets are efficient, then:

expected return

Mary owns a risky stock and anticipates earning 16.5% on her investment in that stock. Which of the following best describes the 16.5% rate?

Risk Premium

On a particular risky investment, investors require an excess return of 7% in addition to the risk-free rate of 4%. What is this excess return called?

unsystematic risk

Portfolio diversification eliminates:

total; systematic

Standard deviation measures ______ risk while beta measures ______ risk.

beta coefficient

The amount of systematic risk present in a particular risky asset relative to that in an average risky asset is measure by the:

lower,lower

The lower the standard deviation of returns on a security, the ______ the expected rate of return and the _______ the risk

Systematic

The risk premium for an individual security is based on which one of the following types of risk?

Volatility

The standard deviation measures the _______ of a security's returns over time.

If a risky security is correctly priced, its expected risk premium will be positive

Which of the following statements is correct?

Stock price that declines over the investment period

Which one of the following could cause the total return on an investment to be a negative rate?

a warehouse fire

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

Decrease in gross domestic product

Which one of these is the best example of systematic risk?