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Temple Keen FIN3101 Chapter 8 Exam Latest Version with A+ Graded Answers
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What are the four elements needed to appropriately compare alternative investments? - Correct Ans: ✔✔
What are the 4 classes of assets Brooks analyzes and how do their average returns and standard deviations compare? - Correct Ans: ✔✔
calculated by subtracting the return on risk-free investment from the return on investment What are the "Reward" and "Risk" in the reward-to-risk ratio and how is this ratio related to Question #1 above? - Correct Ans: ✔✔Reward - Risk Free Rate and Risk Premium What is the rule for selecting assets based on their reward-to-risk ratios? - Correct Ans: ✔✔Highest Reward/Risk Ratio
Over the past 20 years, the average annual return for ShortStop Baseball Gear has been 9% and the standard deviation has been 4%. Given this information you know that the: - Correct Ans: ✔✔95% prediction interval is from 1% to 17%. If the required return for a security is 15% and the risk-free rate is 6%, the risk premium is: - Correct Ans: ✔✔9% Market risk can also be called: - Correct Ans: ✔✔non-diversifiable risk __________ risk is the only risk that matters to investors with broadly diversified portfolios. - Correct Ans: ✔✔Systematic A stock's holding period return represents: - Correct Ans: ✔✔the total return earned over a specific period through buying and selling an asset. You are considering two securities. Security A has a historical average annual return of 7% and a standard deviation of 3%. Security B has a historical average annual return of 7% and a standard deviation of 9%. From this information you can conclude that: - Correct Ans: ✔✔Security B is more risky than Security A.
You are considering two securities. Security A has a historical average annual return of 7% and a standard deviation of 3%. Security B has a historical average annual return of 7% and a standard deviation of 9%. From this information you can conclude that Security B is more risky than Security A. Both securities have the same return but security B is much riskier than security A since it has a higher standard deviation. Standard deviation measures dispersion around the mean for normally distributed securities and a higher number represents greater risk. The beta for a portfolio is determined by calculating: - Correct Ans: ✔✔a weighted average of individual stock betas where the weights equal the percentage invested in each stock. The expected return on a portfolio is: - Correct Ans: ✔✔calculated as the weighted average of the expected returns of the securities in the portfolio. Which of the following correlation coefficients (CorrAB) would generate the most benefit in terms of risk reduction for a 2-asset portfolio that consists of 40% in Asset A and 60% in Asset B? - Correct Ans: ✔✔-. The normal distribution is a symmetrical distribution that is described by its: - Correct Ans: ✔✔mean and standard deviation.