FINC 3610 Final Exam Prep Newest Actual Exam With
Complete 100 Questions And Correct Detailed Answers
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spreading an investment across many diverse assets will eliminate unsystematic risk.
The principle of diversification tells us that:
concentrating an investment in two or three large stocks will eliminate all of your risk.
spreading an investment across five diverse companies will not lower your overall risk at all.
concentrating an investment in three companies all within the same industry will greatly reduce your
overall risk.
spreading an investment across many diverse assets will eliminate all of the risk.
spreading an investment across many diverse assets will eliminate unsystematic risk.
beta coefficient.
The amount of systematic risk present in a particular risky asset, relative to the systematic risk present
in an average risky asset, is called the particular asset's:
beta coefficient.
total risk.
diversifiable risk.
Treynor index.
reward-to-risk ratio.
security market line.
The linear relation between an asset's expected return and its beta coefficient defines the:
characteristic line.
market risk premium.
reward-to-risk ratio.
covariance line.
security market line.
market risk premium.
,The slope of an asset's security market line is the:
beta coefficient.
risk-free interest rate.
reward-to-risk ratio.
market risk premium.
portfolio weight.
increase as the probability of a boom economy increases.
You are considering purchasing stock S. This stock has an expected return of 12 percent if the economy
booms, 8 percent if the economy is normal, and 3 percent if the economy goes into a recessionary
period. The overall expected rate of return on this stock will:
be independent of the probability of each economic state occurring.
increase as the probability of a recession increases.
increase as the probability of a boom economy increases.
be equal to one-half of 8 percent if there is a 50 percent chance of an economic boom.
vary inversely with the growth of the economy.
The expected return is a weighted average where the probabilities of the economic states are used as
the weights.
Which one of the following statements is correct concerning the expected rate of return on an individual
stock given various states of the economy?
The expected return is equal to the summation of the values computed by dividing the expected return
for each economic state by the probability of the state.
The expected return is a weighted average where the probabilities of the economic states are used as
the weights.
As long as the total probabilities of the economic states equal 100 percent, then the expected return on
the stock is a geometric average of the expected returns for each economic state.
The expected return is a geometric average where the probabilities of the economic states are used as
the exponential powers.
The expected return is an arithmetic average of the individual returns for each state of the economy.
a mathematical expectation based on a weighted average and not an actual anticipated outcome.
The expected return on a stock that is computed using economic probabilities is:
guaranteed to equal the actual average return on the stock for the next five years.
guaranteed to equal the actual return for the immediate twelve month period.
the actual return you will receive.
guaranteed to be the minimal rate of return on the stock over the next two years.
a mathematical expectation based on a weighted average and not an actual anticipated outcome.
a well-respected chairman of the Federal Reserve Bank suddenly resigns
Which one of the following is an example of a nondiversifiable risk?
a well-managed firm reduces its work force and automates several jobs
a well-respected chairman of the Federal Reserve Bank suddenly resigns
a well-respected president of a firm suddenly resigns
, a key employee suddenly resigns and accepts employment with a key competitor
a poorly managed firm suddenly goes out of business due to lack of sales
market value of the total shares held in each stock.
When computing the expected return on a portfolio of stocks the portfolio weights are based on the:
number of shares owned in each stock.
price per share of each stock.
cost per share of each stock held.
original amount invested in each stock.
market value of the total shares held in each stock.
is limited by the returns on the individual securities within the portfolio.
The expected return on a portfolio:
can be greater than the expected return on the best performing security in the portfolio.
can be less than the expected return on the worst performing security in the portfolio.
is an arithmetic average of the returns of the individual securities when the weights of those securities
are unequal.
is limited by the returns on the individual securities within the portfolio.
is independent of the performance of the overall economy.
The standard deviation of a portfolio can often be lowered by changing the weights of the securities in
the portfolio.
Which one of the following statements is correct concerning the standard deviation of a portfolio?
Standard deviation is used to determine the amount of risk premium that should apply to a portfolio.
The standard deviation of a portfolio is equal to a weighted average of the standard deviations of the
individual securities held within the portfolio.
The greater the diversification of a portfolio, the greater the standard deviation of that portfolio.
The standard deviation of a portfolio is equal to the geometric average standard deviation of the
individual securities held within that portfolio.
The standard deviation of a portfolio can often be lowered by changing the weights of the securities in
the portfolio.
the portfolio concentration in a single cyclical industry increases.
The standard deviation of a portfolio will tend to increase when:
the portfolio concentration in a single cyclical industry increases.
short-term bonds are replaced with Treasury Bills.
a risky asset in the portfolio is replaced with U.S. Treasury bills.
one of two stocks related to the airline industry is replaced with a third stock that is unrelated to the
airline industry.
the weights of the various diverse securities become more evenly distributed.
the Federal Reserve increases interest rates
Which one of the following is the best example of systematic risk?
the Federal Reserve increases interest rates
Complete 100 Questions And Correct Detailed Answers
(Verified Answers) |Already Graded A+
spreading an investment across many diverse assets will eliminate unsystematic risk.
The principle of diversification tells us that:
concentrating an investment in two or three large stocks will eliminate all of your risk.
spreading an investment across five diverse companies will not lower your overall risk at all.
concentrating an investment in three companies all within the same industry will greatly reduce your
overall risk.
spreading an investment across many diverse assets will eliminate all of the risk.
spreading an investment across many diverse assets will eliminate unsystematic risk.
beta coefficient.
The amount of systematic risk present in a particular risky asset, relative to the systematic risk present
in an average risky asset, is called the particular asset's:
beta coefficient.
total risk.
diversifiable risk.
Treynor index.
reward-to-risk ratio.
security market line.
The linear relation between an asset's expected return and its beta coefficient defines the:
characteristic line.
market risk premium.
reward-to-risk ratio.
covariance line.
security market line.
market risk premium.
,The slope of an asset's security market line is the:
beta coefficient.
risk-free interest rate.
reward-to-risk ratio.
market risk premium.
portfolio weight.
increase as the probability of a boom economy increases.
You are considering purchasing stock S. This stock has an expected return of 12 percent if the economy
booms, 8 percent if the economy is normal, and 3 percent if the economy goes into a recessionary
period. The overall expected rate of return on this stock will:
be independent of the probability of each economic state occurring.
increase as the probability of a recession increases.
increase as the probability of a boom economy increases.
be equal to one-half of 8 percent if there is a 50 percent chance of an economic boom.
vary inversely with the growth of the economy.
The expected return is a weighted average where the probabilities of the economic states are used as
the weights.
Which one of the following statements is correct concerning the expected rate of return on an individual
stock given various states of the economy?
The expected return is equal to the summation of the values computed by dividing the expected return
for each economic state by the probability of the state.
The expected return is a weighted average where the probabilities of the economic states are used as
the weights.
As long as the total probabilities of the economic states equal 100 percent, then the expected return on
the stock is a geometric average of the expected returns for each economic state.
The expected return is a geometric average where the probabilities of the economic states are used as
the exponential powers.
The expected return is an arithmetic average of the individual returns for each state of the economy.
a mathematical expectation based on a weighted average and not an actual anticipated outcome.
The expected return on a stock that is computed using economic probabilities is:
guaranteed to equal the actual average return on the stock for the next five years.
guaranteed to equal the actual return for the immediate twelve month period.
the actual return you will receive.
guaranteed to be the minimal rate of return on the stock over the next two years.
a mathematical expectation based on a weighted average and not an actual anticipated outcome.
a well-respected chairman of the Federal Reserve Bank suddenly resigns
Which one of the following is an example of a nondiversifiable risk?
a well-managed firm reduces its work force and automates several jobs
a well-respected chairman of the Federal Reserve Bank suddenly resigns
a well-respected president of a firm suddenly resigns
, a key employee suddenly resigns and accepts employment with a key competitor
a poorly managed firm suddenly goes out of business due to lack of sales
market value of the total shares held in each stock.
When computing the expected return on a portfolio of stocks the portfolio weights are based on the:
number of shares owned in each stock.
price per share of each stock.
cost per share of each stock held.
original amount invested in each stock.
market value of the total shares held in each stock.
is limited by the returns on the individual securities within the portfolio.
The expected return on a portfolio:
can be greater than the expected return on the best performing security in the portfolio.
can be less than the expected return on the worst performing security in the portfolio.
is an arithmetic average of the returns of the individual securities when the weights of those securities
are unequal.
is limited by the returns on the individual securities within the portfolio.
is independent of the performance of the overall economy.
The standard deviation of a portfolio can often be lowered by changing the weights of the securities in
the portfolio.
Which one of the following statements is correct concerning the standard deviation of a portfolio?
Standard deviation is used to determine the amount of risk premium that should apply to a portfolio.
The standard deviation of a portfolio is equal to a weighted average of the standard deviations of the
individual securities held within the portfolio.
The greater the diversification of a portfolio, the greater the standard deviation of that portfolio.
The standard deviation of a portfolio is equal to the geometric average standard deviation of the
individual securities held within that portfolio.
The standard deviation of a portfolio can often be lowered by changing the weights of the securities in
the portfolio.
the portfolio concentration in a single cyclical industry increases.
The standard deviation of a portfolio will tend to increase when:
the portfolio concentration in a single cyclical industry increases.
short-term bonds are replaced with Treasury Bills.
a risky asset in the portfolio is replaced with U.S. Treasury bills.
one of two stocks related to the airline industry is replaced with a third stock that is unrelated to the
airline industry.
the weights of the various diverse securities become more evenly distributed.
the Federal Reserve increases interest rates
Which one of the following is the best example of systematic risk?
the Federal Reserve increases interest rates
