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FINC 306 Exam 3 Questions And Answers

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Which is another name for systematic risk? - CORRECT - ANSWERS market risk Which type of risk typically affects all stocks at the same time? - CORRECT - ANSWERS systematic risk Which is another name for diversifiable risk? - CORRECT - ANSWERS idiosyncratic risk Diversification can eliminate all risk from a portfolio. - CORRECT - ANSWERS False What is the average correlation between a randomly selected pair of U.S. stocks? - CORRECT - ANSWERS Between 0 and 1 Which correlation will result in the greatest diversification benefit? - CORRECT - ANSWERS between -1 and 0 Think about a portfolio where $100,000 is spread equally across 10 stocks. The portfolio variance is the average of the variances of the 10 stocks. - CORRECT - ANSWERS False When thinking about stocks, the risk-expected return tradeoff likely reflects which type of risk? - CORRECT - ANSWERS Systematic

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FINC 306 Exam 3 Questions And Answers



Which is another name for systematic risk? - CORRECT - ANSWERS market risk




Which type of risk typically affects all stocks at the same time? - CORRECT - ANSWERS
systematic risk




Which is another name for diversifiable risk? - CORRECT - ANSWERS idiosyncratic risk




Diversification can eliminate all risk from a portfolio. - CORRECT - ANSWERS False




What is the average correlation between a randomly selected pair of U.S. stocks? - CORRECT -
ANSWERS Between 0 and 1




Which correlation will result in the greatest diversification benefit? - CORRECT - ANSWERS
between -1 and 0




Think about a portfolio where $100,000 is spread equally across 10 stocks. The portfolio
variance is the average of the variances of the 10 stocks. - CORRECT - ANSWERS False




When thinking about stocks, the risk-expected return tradeoff likely reflects which type of
risk? - CORRECT - ANSWERS Systematic




According to the CAPM, what is the relationship between a stock's volatility and its required
rate of return? - CORRECT - ANSWERS No relationship between volatility adn required
rate of return
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