FIN 201 Exam Module 1 with all Correct & 100% Verified
Answers |Guaranteed to Pass
realized return ✔Correct Answer-When the earnings for an investment are calculated relating
to real value increases that occurred over the life the investment, the proper type return that
describes this is
expected return ✔Correct Answer-When investment returns in the future need estimated,
the type of return most likely to be calculated is
Calculate the expected return of the following investment with the below parameters.
✔Correct Answer-Expected Return = (0.80) x 10% + (0.15) x -5% + (0.05) x 25% = 8.5%
Diversifying a portfolio does what? ✔Correct Answer-It decreases unsystematic risk
Risk that is associated with events that affect a specific asset and can be lessened through
diversification is called ✔Correct Answer-unsystematic risk
The risk associated with dispersion around an expected return is measured by the ✔Correct
Answer-standard deviation
The risk associated with stocks return and value relative to the overall market is known as
✔Correct Answer-beta coefficient
The larger the standard deviation around the returns of an asset suggests increased risk
because ✔Correct Answer-returns have larger deviations from the average return, which
make the investment less predictable.
The larger the beta coefficient around the returns of an asset relative to the market suggests
increased risk because ✔Correct Answer-risk adjusted returns are multiplied by this number
and large number values tend to amplify returns positively and negatively.
An investor may reduce risk by selecting ✔Correct Answer-stocks with poorly correlated
returns
For a security to help diversify a portfolio, the asset ✔Correct Answer-should have a return
that is negatively correlated with the return on other securities in the portfolio.
To measure risk, the capital asset pricing model (CAPM) uses ✔Correct Answer-beta
Compute the required return using the capital asset pricing model for the investment with the
following attributes. The current yield of risk free rate is 2.0%. The market return is
Answers |Guaranteed to Pass
realized return ✔Correct Answer-When the earnings for an investment are calculated relating
to real value increases that occurred over the life the investment, the proper type return that
describes this is
expected return ✔Correct Answer-When investment returns in the future need estimated,
the type of return most likely to be calculated is
Calculate the expected return of the following investment with the below parameters.
✔Correct Answer-Expected Return = (0.80) x 10% + (0.15) x -5% + (0.05) x 25% = 8.5%
Diversifying a portfolio does what? ✔Correct Answer-It decreases unsystematic risk
Risk that is associated with events that affect a specific asset and can be lessened through
diversification is called ✔Correct Answer-unsystematic risk
The risk associated with dispersion around an expected return is measured by the ✔Correct
Answer-standard deviation
The risk associated with stocks return and value relative to the overall market is known as
✔Correct Answer-beta coefficient
The larger the standard deviation around the returns of an asset suggests increased risk
because ✔Correct Answer-returns have larger deviations from the average return, which
make the investment less predictable.
The larger the beta coefficient around the returns of an asset relative to the market suggests
increased risk because ✔Correct Answer-risk adjusted returns are multiplied by this number
and large number values tend to amplify returns positively and negatively.
An investor may reduce risk by selecting ✔Correct Answer-stocks with poorly correlated
returns
For a security to help diversify a portfolio, the asset ✔Correct Answer-should have a return
that is negatively correlated with the return on other securities in the portfolio.
To measure risk, the capital asset pricing model (CAPM) uses ✔Correct Answer-beta
Compute the required return using the capital asset pricing model for the investment with the
following attributes. The current yield of risk free rate is 2.0%. The market return is
