ESSENTIALS OF INVESTMENTS
CHAPTER 6 QUESTIONS WITH
CORRECT ANSWERS 2024-2025
marke,Osystematic,OnondiversiableOriskO-OcorrectOanswer-riskOfactorsOcommonOtoOtheOwholeOeconomy
unique,Ofirm-specific,Ononsystematic,OdiversiableOriskO-OcorrectOanswer-
riskOthatOcanObeOeliminatedObyOdiversificationO(4Onames)
investmentOopportunityOsetO-OcorrectOanswer-setOofOavailableOportfolioOrisk-returnOcombinations
optimalOriskyOportfolioO-OcorrectOanswer-
theObestOcombinationOofOriskyOassetsOtoObeOmixedOwithOsafeOassetsOtoOformOtheOcompleteOportfolio
efficientOfrontierO-OcorrectOanswer-
graphOrepresentingOaOsetOofOportfoliosOthatOmaximizesOexpectedOreturnOatOeachOlevelOofOportfolioOrisk
seperationOpropertyO-OcorrectOanswer-
theOpropertyOthatOimpliesOportfolioOchoiceOcanObeOseperatedOintoOtwoOindependentOtasks:O(1)Odetermina
tionOofOtheOoptimalOriskyOportfolio,OwhichOisOaOpurelyOtechnicalOproblem,OandO(2)OtheOpersonalOchoiceOofO
theObestOmixOofOtheOriskyOportfolioOandOtheOrisk-freeOasset
indexOmodelO-OcorrectOanswer-
modelOthatOrelatesOstockOreturnsOtoOreturnsOonObothOaObroadOmarketOindexOandOfirm-specificOfactors
excessOreturnO-OcorrectOanswer-rateOofOreturnOinOexcessOofOtheOrisk-freeOrate
betaO-OcorrectOanswer-theOsensivityOofOaOsecurity'sOreturnsOtoOtheOmarketOfactor
firm-specificOorOresidualOriskO-OcorrectOanswer-
componentOofOreturnOvarianceOthatOisOindependentOofOtheOmarketOfactor
CHAPTER 6 QUESTIONS WITH
CORRECT ANSWERS 2024-2025
marke,Osystematic,OnondiversiableOriskO-OcorrectOanswer-riskOfactorsOcommonOtoOtheOwholeOeconomy
unique,Ofirm-specific,Ononsystematic,OdiversiableOriskO-OcorrectOanswer-
riskOthatOcanObeOeliminatedObyOdiversificationO(4Onames)
investmentOopportunityOsetO-OcorrectOanswer-setOofOavailableOportfolioOrisk-returnOcombinations
optimalOriskyOportfolioO-OcorrectOanswer-
theObestOcombinationOofOriskyOassetsOtoObeOmixedOwithOsafeOassetsOtoOformOtheOcompleteOportfolio
efficientOfrontierO-OcorrectOanswer-
graphOrepresentingOaOsetOofOportfoliosOthatOmaximizesOexpectedOreturnOatOeachOlevelOofOportfolioOrisk
seperationOpropertyO-OcorrectOanswer-
theOpropertyOthatOimpliesOportfolioOchoiceOcanObeOseperatedOintoOtwoOindependentOtasks:O(1)Odetermina
tionOofOtheOoptimalOriskyOportfolio,OwhichOisOaOpurelyOtechnicalOproblem,OandO(2)OtheOpersonalOchoiceOofO
theObestOmixOofOtheOriskyOportfolioOandOtheOrisk-freeOasset
indexOmodelO-OcorrectOanswer-
modelOthatOrelatesOstockOreturnsOtoOreturnsOonObothOaObroadOmarketOindexOandOfirm-specificOfactors
excessOreturnO-OcorrectOanswer-rateOofOreturnOinOexcessOofOtheOrisk-freeOrate
betaO-OcorrectOanswer-theOsensivityOofOaOsecurity'sOreturnsOtoOtheOmarketOfactor
firm-specificOorOresidualOriskO-OcorrectOanswer-
componentOofOreturnOvarianceOthatOisOindependentOofOtheOmarketOfactor