**APU FINC600 Week 3 Quiz (2016)**

Question 1 of 15 1.0/ 1.0 Points

Which of the following portfolios have the least risk?

A.A portfolio of Treasury bills

B.A portfolio of long-term United States Government bonds

C. Portfolio of U.S. common stocks of small firms

D. None of the above

Question 2 of 15 1.0/ 1.0 Points

If the average annual rate of return for common stocks is 11.7%, and for treasury bills it is 4.0%, what is the market risk premium?

A.15.8%

B.4.1%

C.7.7%

D. None of the above

Question 3 of 15 1.0/ 1.0 Points

Spill Oil Company's stocks had -8%, 11% and 24% rates of return during the last three years respectively; calculate the average rate of return for the stock.

A.8% per year

B.9% per year

C.11% per year

D. None of the above

Question 4 of 15 1.0/ 1.0 Points

Given the following data: risk-free rate = 4%, average risk premium = 7.7%. Calculate the required rate of return:

A.5.6%

B.7.6%

C.11.7%

D. None of the given answers

Question 5 of 15 1.0/ 1.0 Points

The unique risk is also called the:

A. Unsystematic risk

B. Diversifiable risk

C. Firm specific risk

D. All of the above

Question 6 of 15 1.0/ 1.0 Points

Market risk is also called: I) systematic risk, II) undiversifiable risk, III) firm specific risk.

A.I only

B.II only

C.III only

D.I and II only

Question 7 of 15 1.0/ 1.0 Points

Stock A has an expected return of 10% per year and stock B has an expected return of 20%. If 40% of the funds are invested in stock A, and the rest in stock B, what is the expected return on the portfolio of stock A and stock B?

A.10%

B.20%

C.16%

D. None of the above

Question 8 of 15 1.0/ 1.0 Points

If the correlation coefficient between stock C and stock D is +1.0% and the standard deviation of return for stock C is 15% and that for stock D is 30%, calculate the covariance between stock C and stock D.

A.+45

B.-450

C.+450

D. None of the above

Question 9 of 15 1.0/ 1.0 Points

The beta of market portfolio is:

A.+ 1.0

B.+0.5

C.0

D.-1.0

Question 10 of 15 1.0/ 1.0 Points

The distribution of returns, measured over a short interval of time, like daily returns, can be approximated by:

A. Normal distribution

B. Lognormal distribution

C. Binomial distribution

D. none of the above

Question 11 of 15 1.0/ 1.0 Points

Florida Company (FC) and Minnesota Company (MC) are both service companies. Their historical return for the past three years are: FC: - 5%,15%, 20%; MC: 8%, 8%, 20%. If FC and MC are combined in a portfolio with 50% of the funds invested in each, calculate the expected return on the portfolio.

A.12%

B.10%

C.11%

D. None of the above.

Question 12 of 15 1.0/ 1.0 Points

Suppose you invest equal amounts in a portfolio with an expected return of 16% and a standard deviation of returns of 20% and a risk-free asset with an interest rate of 4%; calculate the expected return on the resulting portfolio:

A.10%

B.4%

C.12%

D. none of the above

Question 13 of 15 1.0/ 1.0 Points

Suppose you invest equal amounts in a portfolio with an expected return of 16% and a standard deviation of returns of 20% and a risk-free asset with an interest rate of 4%; calculate the standard deviation of the returns on the resulting portfolio:

A.8%

B.10%

C.20%

D. none of the above

Question 14 of 15 1.0/ 1.0 Points

The correlation measures the:

A. Rate of movements of the return of individual stocks

B. Direction of movement of the return of individual stocks

C. Direction of movement between the returns of two stocks

D. Stock market volatility

Question 15 of 15 1.0/ 1.0 Points

The security market line (SML) is the graph of:

A. Expected rate on investment (Y-axis) vs. variance of return

B. Expected return on investment vs. standard deviation of return

C. Expected rate of return on investment vs. beta

D.A and B

**Category:**Business, General Business

**Odisho**

- Ratings 18
- Grade:
**B** - Questions 0
- Solutions 2141
- Blog 0
- Earned: $4243.45