Chapter 11

The slope of the security market line represents the:

market risk premium.

Unsystematic risk can be defined by all of the following except:

market risk.

Standard deviation measures ________ risk while beta measures ________ risk.

total; systematic

Portfolio diversification eliminates:

unsystematic risk.

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

Decrease in gross domestic product

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

Expected Return

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

A warehouse fire

Stock A comprises 28 percent of Susan's portfolio. Which one of the following terms applies to the 28 percent?

Portfolio weight

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

beta coefficient.

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

that is > 0 but < 1.