QUESTION 1

The S&P 500 index delivered a return of 20%, 10%, -25%, and -5% over four successive years. What is the

average annual return per year?

		0%
		2.5%
		-2.5%
		3%

1.25 points

QUESTION 2

Suppose the inflation rate is 3% and your portfolio generates 10% return per year. What is the real rate of return of your portfolio?

		3%
		10%
		7%
		6.8%

1.25 points

QUESTION 3

The risk premium of a security is determined by its __________ risk and does not depend on its __________

risk.

		Systematic, systematic
		Systematic, unsystematic
		unsystematic, unsystematic
		unsystematic, systematic

1.25 points

QUESTION 4

You expect General Motors (GM) to have a beta of 1 over the next year and the beta of Exxon Mobil (XOM)

to be 1.2 over the next year. Also, you expect the volatility of General Motors to be 30% and that of Exxon

Mobil to be 40% over the next year. Which stock has more systematic risk? Which stock has more total risk?

	A.	XOM, XOM
	B.	XOM, GM
	C.	GM, GM
	D.	GM, XOM