1. Which of the following is true?

a. The geometric average return is a better measure of realized returns than the arithmetic average return.

b. None of THESE

c. The covariance between two risky assets is a better measure of the association of returns between them than the correlation coefficient.

d. The arithmetic average return is a better measure of realized returns than the geometric average return.

2. Kim Johnson is considering investing part of her savings in BCE shares, which have an expected return of 18%. The risk-free rate is 6% and the rate of return of the market portfolio is 12%. What is the beta of BCE stock?

a. 2.0

b. 1.5

c. 2.5

d. None of THESE

e. 1.0

3. A corporation compensates shareholders by paying them interest for their contribution to the capital of the firm.

True

False

4. A stock with a beta of 0.8 indicates that if the return on the market increases by 1%, then the return on the stock would increase by 0.8%.

True

False