Q1

If the capital market is in equilibrium then for an asset:

Select one:

a. It's expected return will be equal to the risk-free rate

b. It's expected return will equal it's required rate of return

c. It's expected return will be equal to the market return

d. None of the above

Question2

Question text

If the returns on two assets are perfectly positively correlated and an equally weighted portfolio consisting of the two assets is formed, the standard deviation of the resulting portfolio will be:

Select one:

a. Below the average of the standard deviations of the two assets

b. Above the average of the standard deviations of the two assets

c. The average of the standard deviations of the two assets

d. Cannot be determined

Question3

Question text

If the mean/average/expected return on an investment with a normal distribution of returns is 12.5% and the standard deviation of the returns is 4.3%, then there is a 95% chance the returns will lay between which of the following:

Select one:

a. -8.2% and 16.8%

b. 8.2% and 16.8%

c. -0.4% and 25.4%

d. 3.9 and 21.1%

Question4

Question text

In considering the operations of a car manufacturing company, diversifiable risk is best described as:

Select one:

a. The combination of risk factors that relate to the operations of the car company

b. All those factors that influence all companies in the economy, regardless of industry

c. Variations in international commodity prices and the price of gold

d. Changes in interest rates as determined by the central bank

Question5

Question text

Which of the following describes a strong-form efficient market?

Select one:

a. Share prices reflect all previous price information.

b. Share prices reflect all publicly available information.

c. Share prices reflect all available information

d. None of the above