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
Analyzed exclusively
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) only
(1) and (3) only
(1) and (2) only
(2) and (3) only
Industry risk
Specific risk
Undiversifiable risk
Residual risk
I, II, III
I, III, IV
I, II, IV
I, II, III, IV
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
(1) only
(2) only
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 ‘
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Content
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
Analyzed exclusively
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) only
(1) and (3) only
(1) and (2) only
(2) and (3) only
Industry risk
Specific risk
Undiversifiable risk
Residual risk
I, II, III
I, III, IV
I, II, IV
I, II, III, IV
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
(1) only
(2) only
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 ‘