The excess return required from a risky asset over that required from a risk-free asset is called the:

variance.

average return.

geometric premium.

risk premium.

excess return.

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You have a $1,000 portfolio which is invested in stocks A and B plus a risk-free asset. $400 is invested in stock A. Stock A has a beta of 1.3 and stock B has a beta of .7.How much needs to be invested in stock B if you want a portfolio beta of .90?

$600

$482

$268

$0

$543

The beta of a security is calculated by:

dividing the variance of the market by the correlation of the security with the market.

dividing the correlation of the security with the market by the variance of the market.

dividing the covariance of the security with the market by the variance of the market.

dividing the variance of the market by the covariance of the security with the market.

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The linear relation between an asset's expected return and its beta coefficient is the:

portfolio risk.

security market line.

portfolio weight.

market risk premium.

reward-to-risk ratio.

The principle of diversification tells us that:

concentrating an investment in three companies all within the same industry will greatly reduce your overall risk.

spreading an investment across many diverse assets will eliminate some of the risk.

spreading an investment across many diverse assets will eliminate all of the risk.

concentrating an investment in two or three large stocks will eliminate all of your risk.

spreading an investment across five diverse companies will not lower your overall risk at all.

Clear selection

You purchased 300 shares of Deltona, Inc. stock for $44.90 a share. You have received a total of $630 in dividends and $14,040 in proceeds from selling the shares. What is your capital gains yield on this stock?

4.06%

4.23%

4.68%

8.91%

8.55%

You recently purchased a stock that is expected to earn 12% in a booming economy, 8% in a normal economy and lose 5% in a recessionary economy. There is a 15% probability of a boom, a 75% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of return on this stock?

7.65%

6.45%

8.30%

5.00%

7.30%

You purchased 200 shares of stock at a price of $36.72 per share. Over the last year, you have received total dividend income of $322. What is the dividend yield?

11.4%

6.8%

4.4%

9.2%

3.2%

Market risk is measured by:

the standard deviation.

beta.

the mean.

the arithmetic average.

the geometric average.

Which of the following statements concerning the standard deviation are correct? I. The greater the standard deviation, the lower the risk. II. The standard deviation is a measure of volatility. III. The higher the standard deviation, the less certain the rate of return in any one given year. IV. The higher the standard deviation, the higher the expected return.

II, III, and IV only

I, II, and III only

I and III only

I, III, and IV only

I, II, III, and IV

Clear selection

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