for that security. CHAPTER 8 5. The slope of the characteristic line for a specific security is an estimate of a. alpha b. beta c. total risk d. relative risk 16. A beta value of 0.5 for a security indicates that the security has a. average systematic risk b. above-average systematic risk c. nounsystematic risk d. below-average systematic risk 19. A security that is completely uncorrelated (Pim0) with the market portfolio would have a beta of_ b. 0 c. +1 d -100 22. All of the following factors have their primary impact on unsystematic risk EXCEPT a. availability of raw materials b. effects of foreign competition c. changes in inflation d. strikes 26. The risk premium for an individual security is equal to the a beta times the market return b. difference between the required return and the risk-free rate c. weighted average of the individual security betas in a portfolio d. security's covariance divided by the variance of the market 28. What will happen to the Security Market Line if (1) inflation expectations increase and (2) investors become more risk averse? a. It will shift up and have a steeper slope. b. It will shift down and have the same slope. c. It will shift down and have a steeper slope. d. It will shift up but have less slope. 32. In order to completely eliminate the risk (i.c., a portfolio standard deviation of zero) in a two-asset portfolio, the correlation coefficient between the securities must be a. less than +10 b. equal to 0.0 c. less than 0.0 d. equal to -1.0 41. Investors can obtain high returns in their investments if they a. use hedging techniques b. assume high risks c. invest only international securities d. invest in legal Ponzi type securities 48. The ability of an investor to buy and sell a company's securities quickly and without a significant loss of value is known as the risk. a financial b. marketability c. business d security