What is the required return of a portfolio consisting of 40% of the asset above (ER 16%) and the rest in an asset with the same risk as the market?
14.3%
12%
13.6%
16% correct answers 13.6%
The risk-free rate is 4%, and the required return on the market is 12%. The beta of the asset is 1.5. ...
Exam FINC 303 || with 100% Errorless Solutions.
What is the required return of a portfolio consisting of 40% of the asset above (ER 16%) and the
rest in an asset with the same risk as the market?
14.3%
12%
13.6%
16% correct answers 13.6%
The risk-free rate is 4%, and the required return on the market is 12%. The beta of the asset is
1.5. What is the reward/risk ratio in equilibrium?
16%
12%
8%
28%
24% correct answers 8%
The risk-free rate is 4%, and the required return on the market is 12%. What is the required
return on an asset with a beta of 1.5?
12%
16%
8%
28%
24% correct answers 16%
The market risk premium is the same as the reward to risk ratio of an asset in equilibrium.
True
False correct answers True
The market risk premium is the
Risk-free rate - expected return of the market
Expected return of the market - risk-free rate
Systematic risk - unsystematic risk correct answers Expected return of the market - risk-free rate
Systematic risk is represented by which of the following:
The effect of a decrease in natural gas prices on the utilities industry.
The effect of an economy facing inflation.
The effect of the emissions scandal on Volkswagen.
The effect of store closings on JC Penneys. correct answers The effect of an economy facing
inflation.
The beta of the risk-free asset is always equal to:
0
1
-1
10 correct answers 0
, The beta of the market is always equal to:
0
10
1
-1 correct answers 1
Unsystematic risk is represented by which of the following:
The effect of an economy facing recession.
The effect of the Federal Reserve raising interest rates.
The effect of the crash of the global housing market.
The effect of a strike by auto workers on Chrysler-Fiat. correct answers The effect of a strike by
auto workers on Chrysler-Fiat.
Systematic risk is measured by:
Expected return
Beta
Variance
Standard deviation correct answers Beta
Total risk is measured by:
Expected return
Beta
Variance
Standard deviation correct answers Standard deviation
The beta of a portfolio cannot be lower than the lowest individual beta in the portfolio nor
greater than the highest individual beta in the portfolio.
True
False correct answers True
Which of the following indicates a portfolio is being effectively diversified?
An increase in the portfolio's beta.
An increase in the portfolio's standard deviation.
A decrease in the portfolio's beta.
A decrease in the portfolio's standard deviation. correct answers A decrease in the portfolio's
standard deviation.
Security C has a standard deviation of 20% and a beta of 1.25 and Security K has a standard
deviation of 30% and a beta of 0.95. Which security should have the higher expected return?
Security C
Security K correct answers Security C
Security C has a standard deviation of 20% and a beta of 1.25 and Security K has a standard
deviation of 30% and a beta of 0.95. Which security has more systematic risk?
Security C
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