Finance 342
1. This is a measure summarizing the overall past performance of an investment. Average Return
2. This includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment. Dollar Return
3. Which of these statements is true? When people purchase a stock, the do not know their return, neither the short term nor the long-term.
4. This is the volatility of the investment, which includes firm-specific risk as well as market risk. Total risk
5. This measures the amount of risk per unit of return.Coefficient of variation
6. Which statement is true? The larger the standard deviation, the higher the total risk.
7. This is defined as the portion of total risk that is attributable to firm or idustry factors and can be reduced through diversification. Firm-specific risk
8. This is the protion of total risk that is attributable to overall economic factors. Market risk
9. This is a measurement of the co-movement between two variables that ranges between -1 and +1. Correlation
10. This is the investor's combination of securities that achieves the highest expected return for a given risk level. Optimal portfolio
Chapter 10
11. Which of the following is a true statement? Firms can quite possibly change their stocks’ risk level by substantially changing their business.
12. This is the reward investors require for taking risk. Risk premium
13. In theory, this is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate. Market portfolio
14. Which of these is the line on a graph of return and risk (STDEV) from the risk-free rate throught the market portfolio? Capital Market Line
15. A measurement of the sensitivity of a stock or portfolio to market risk is: Beta
16. Which of the following is NOT a necessary condition for an efficient market? No trading or transaction costs
17. The study of the cognitive processes and biases associated with making
2. This includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment. Dollar Return
3. Which of these statements is true? When people purchase a stock, the do not know their return, neither the short term nor the long-term.
4. This is the volatility of the investment, which includes firm-specific risk as well as market risk. Total risk
5. This measures the amount of risk per unit of return.Coefficient of variation
6. Which statement is true? The larger the standard deviation, the higher the total risk.
7. This is defined as the portion of total risk that is attributable to firm or idustry factors and can be reduced through diversification. Firm-specific risk
8. This is the protion of total risk that is attributable to overall economic factors. Market risk
9. This is a measurement of the co-movement between two variables that ranges between -1 and +1. Correlation
10. This is the investor's combination of securities that achieves the highest expected return for a given risk level. Optimal portfolio
Chapter 10
11. Which of the following is a true statement? Firms can quite possibly change their stocks’ risk level by substantially changing their business.
12. This is the reward investors require for taking risk. Risk premium
13. In theory, this is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate. Market portfolio
14. Which of these is the line on a graph of return and risk (STDEV) from the risk-free rate throught the market portfolio? Capital Market Line
15. A measurement of the sensitivity of a stock or portfolio to market risk is: Beta
16. Which of the following is NOT a necessary condition for an efficient market? No trading or transaction costs
17. The study of the cognitive processes and biases associated with making