Question
Which is the best measure of risk for an asset held in isolation? Which is the best measure for an asset held in a diversified
Which is the best measure of risk for an asset held in isolation? Which is the best measure for an asset held in a diversified portfolio?
a. Variance; correlation coefficient
b. Standard deviation ; correlation coefficient
c. Beta; variance
d. Coefficient of variation; beta
e. Beta; beta
5. Stock A has a beta of 2.5 and Stock B has a beta of 0.8. Which of the following statements must be true about these securities? (Assume the market is in equilibrium.)
a. When held in isolation, Stock A has greater risk than Stock B.
b. Stock B would be a more desirable addition to a portfolio than Stock
c. Stock A would be a more desirable addition to a portfolio than Stock
d. The required return on Stock A will be greater than that on Stock B.
e. The required return on Stock B will be greater than that on Stock
6. Which one of the following should be the ultimate goal of fianacial management?
a. Maximizing returns
b. Maximizing earnings
c. Minimizing costs
d. Minimizing risk
e. Maximizing shareholders wealth
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