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MGT 181 Final Exam Questions with Correct
Answers | Updated (100% Correct Answers)
total risk Answer: standard deviation of a stock's returns
systematic and unsystematic
for well-diversified: unsystematic risk very small
total risk for diversified portfolio is essentially = systematic risk
total return Answer: expected return + unexpected return
systematic risk Answer: market risks - unanticipated events that
affect almost all assets to some degree
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MEASURED BY BETA
risk factors that affect large number of assets
aka non-diversifiable or market risk
includes things like GDP, inflation, interest rates, presidential
elections
unsystematic risk Answer: unique or asset specific - unanticipated
events that affect single assets of small groups of assets
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risk factors that affect limited number of assets
aka unique risk and asset specific risk
includes labor strikes, part shortages, etc.
effect of diversification Answer: some but not all of the risks
associated with a risky investment can be eliminated by
diversification (not putting all eggs (investment) into one basket
systematic risk principal and beta Answer: the reward for bearing
risk depends only on the level of systematic risk (you can diversify
away unsystematic risk)
level of systematic risk in a given asset, relative to average, is given
by the *Beta* of that asset
Harry Markowitz Answer: Father of Modern Portfolio Theory
further developed by William Sharpe and Merton Miller
Modern Portfolio Answer: basis of modern financial management
reward to risk ratio Answer: ratio of its risk premium to its beta
all assets plot on same line: the security market line (SML)
risk premium: (E(Ri)-Rf))
© 2025 All rights reserved
MGT 181 Final Exam Questions with Correct
Answers | Updated (100% Correct Answers)
total risk Answer: standard deviation of a stock's returns
systematic and unsystematic
for well-diversified: unsystematic risk very small
total risk for diversified portfolio is essentially = systematic risk
total return Answer: expected return + unexpected return
systematic risk Answer: market risks - unanticipated events that
affect almost all assets to some degree
-->
MEASURED BY BETA
risk factors that affect large number of assets
aka non-diversifiable or market risk
includes things like GDP, inflation, interest rates, presidential
elections
unsystematic risk Answer: unique or asset specific - unanticipated
events that affect single assets of small groups of assets
© 2025 All rights reserved
, 2
-->
risk factors that affect limited number of assets
aka unique risk and asset specific risk
includes labor strikes, part shortages, etc.
effect of diversification Answer: some but not all of the risks
associated with a risky investment can be eliminated by
diversification (not putting all eggs (investment) into one basket
systematic risk principal and beta Answer: the reward for bearing
risk depends only on the level of systematic risk (you can diversify
away unsystematic risk)
level of systematic risk in a given asset, relative to average, is given
by the *Beta* of that asset
Harry Markowitz Answer: Father of Modern Portfolio Theory
further developed by William Sharpe and Merton Miller
Modern Portfolio Answer: basis of modern financial management
reward to risk ratio Answer: ratio of its risk premium to its beta
all assets plot on same line: the security market line (SML)
risk premium: (E(Ri)-Rf))
© 2025 All rights reserved
