DIRECTIONS: Here is the Unit #6 Weekly Quiz Question Sheet that you should submit to your Unit #6 Homework Assignment Folder.
Please submit your Unit #6 Quiz Answer Sheet in MS Word format with the following file name: LastNameFirstInitial_Unit 06_QuizAnswerSheet.docx. For example, if you name is John Smith, the file name of your Answer Sheet should be SmithJ_Unit06_QuizAnswerSheet.docx.
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|1||Which of the following risks confronting ABC Worldwide, Inc. is an example of an unsystematic risk?
A possible decline in the value of its holdings of short-term securities due to fluctuation in interest rates
A possible decline in its earnings due to a strike by its employees
A possible decline in the purchasing power of its net income due to inflations
A possible decline in its net worth due to the need to reinvest funds from an investment at a lower rate than was earned initially
|2||According to Markowitz risk can be:
Minimized and eliminated without diversification
Eliminated without compromizing the overall returns
Minimized by selecting an optimum combination of investments
|3||Which of the following statement(s) concerning beta coefficients is (are) correct?
Investors who tend to be risk averse should have a portfolio made up mostly of high-beta-coefficient securities.
Beta coefficients of particular securities change over time
Beta coefficients are constructed based on past data
(1) and (3) only
(1) and (2) only
(2) and (3) only
|4||A measure of the degree to which two variables move predictably is known as
B. Standard deviation
D. Positive selection
|5||Which of the following concerning the standard deviation of a stock’s rate of return is (are) correct:
The standard deviation of a stock’s rate of return reflects both the systematic and unsystematic risks associated with a stock
Approximately 68% of the rates of return on the stock will fall within plus or minus one stand deviation of the average rate of return
Both (1) and (2)
Neither (1) nor (2)
|6||Items that circumvent Fisher’s Perfect World include:
No barriers to trade
Free flow of information
The firm’s indepent decisionmaking
Satisfying stockholder wealth maximization criteria
Investor’s receiving regular dividends
I, II, III
I, II, III IV,
II, III, IV, V
I, II, III, IV, V
|7||Which of the following concerning systematic and/or unsystematic risk is not correct?
A.. Unsystematic risk can be reduced through diversification of a portfolio
B. A coefficient of determination of .75 in a portfolio means that 75% of the portfolio risk is unsystematic
C. A portfolio’s beta is a measure of its systematic risk
D. A fully diversified portfolio has no unsystematic risk ‘
|8||Portfolio risks can be calculated. Which of the following statistical formulas calculate portfolio risk?
Capital Asset Pricing Model (CAPM)
Standard deviation of the variance of returns
|9||Unsystematic risk is diversifiable:
|10||The beta of a security:
Is not the same as its systematic risk level
Can be measured by standard deviation
Is the slop of the capital market line
I and III only
None of the above
|11||Investment risk can best be defined as the _________ in the expected return of an investment.
B. stematic component
D. unsystematic component
|12||Stocks X and Y produced the following returns in recent years:
Year Stock X Stock Y
1 6% 2%
2 8% 0%
3 4% 10%
4 9% 12%
5 11% 14%
Avg 7.6% 7.6%
Which of the following are the standard deviations of the returns on the two stocks?
X = 2.7, Y = 6.2
X = 2.7, Y = 4.8
X = 3.8, Y = 6.5
X = 3.8, & = 5.9