Inflation, recession, and high interest rates are economic events that are best characterized as being systematic risk factors that can be diversified away. company-specific risk factors that can be diversified away. among the factors that are responsible for market risk. risks that are beyond the control of investors and that should not be considered by security analysts or portfolio managers. irrelevant expect to government authorities like the Federal Reserve. A bond has a $1,000 per value, makes annual interest payments of $100, has 5 years to maturity, cannot be called, and is not expected to default. The bond should sell at a premium if interest rates are below 10% and at a discount if interest rates are greater than 10%. (True; False) One way of calculating K_c is to use the Capital Asset Pricing model as follows: K_c = R_f + (K - R_f) K_c = RR + IP + ERP K_c = R_f + B(K_m - R_f) K_c = D_1/P_0 + g Suppose you hold a diversified portfolio consisting of a $10,000 investment in each of 12 different common stocks. The portfolio's beta is 1.25. Now suppose you decided to sell one of your stocks that has a beta of 1.00 and so use the proceeds to buy a replacement stock with a beta of 1.34. What would the portfolio's new beta be? 1.15 1.21 1.28 1.37 1.41 ABC Corp. issued a 12 percent, 20 years coupon rate bond 5 years ago. Interest rates are not 8 percent. Based on semi-annual analysis and using the table below, determine the current price of the bond? 1, 345.52 1, 565.96 1, 037.52 1, 395.58 The standard deviation it a better measure of risk than the coefficient of variation if the expected returns of the securities being compared differ significantly. (True; False) Which of the following statements is CORRECT? An investor can eliminate virtually all market risk if he or she holds a very large and well diversified portfolio of stocks. The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio. It is impossible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock. Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount. An investor can eliminate virtually all diversifiable risk if he or she holds a very large, well diversified portfolio of stocks