This quiz works best with JavaScript enabled. Home > Finance > Risk > Risk And Return – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Risk And Return Quiz 4 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Two stocks with the following criteria:Share A return three years 12.5%;10%;10%Share B return three years 15%;7%;10%The weight for each year is 50% Determine the correlation coefficient of the two stocks! answer choices A) 0.93. B) 0.72. C) 0.56. D) 0.47. Show Answer Correct Answer: A) 0.93. 2. An investor is the least tolerant of risk during this stage of the lifecycle. A) During college. B) After college. C) Retirement. D) 30-50 years of age. Show Answer Correct Answer: C) Retirement. 3. The appropriate cost of capital for a project depends on: A) The type of assets (current or fixed) used in the project. B) The interest rate on the company's outstanding long-term bonds. C) The type of security issued to finance the project. D) The risk associated with the project. Show Answer Correct Answer: D) The risk associated with the project. 4. Risk is used interchangeably with ..... to explain the variability of returns. A) Expectation. B) Risk averse. C) Uncertainty. D) Diversification. Show Answer Correct Answer: C) Uncertainty. 5. Which is the riskiest investment? A) Investment A:ER = 22%; SD = 10%. B) Investment B:ER = 24%; SD = 12%. C) Investment C:ER = 21%; SD = 14%. D) Investment D:ER = 20%; SD = 11%. Show Answer Correct Answer: C) Investment C:ER = 21%; SD = 14%. 6. Investors should be agreeing to invest in the Riskier investments merely A) If return is short. B) If there are no safe alternatives except for holding cash. C) If expected return is adequate for risk level. D) If they are true speculators. Show Answer Correct Answer: C) If expected return is adequate for risk level. 7. The expected risk premium on a stock is equal to the expected return on the stock minus the: A) Risk-free rate. B) Inflation rate. C) Standard deviation. D) Expected market rate of return. Show Answer Correct Answer: A) Risk-free rate. 8. Total risk is measured by ..... and systematic risk is measured by ..... A) Beta; standard deviation. B) Alpha; beta. C) Standard deviation; beta. D) Standard deviation; variance. Show Answer Correct Answer: C) Standard deviation; beta. 9. A portfolio has three stocks-240 shares of Yahoo (YHOO), 150 Shares of General Motors (GM), and 40 shares of Standard and Poor's Index Fund (SPY). If portfolio weight of YHOO is 0.426 and portfolio weight of GM is 0.266.Calculate the portfolio weight of SPY. A) 0.308. B) 0.318. C) 0.0308. D) None of above. Show Answer Correct Answer: A) 0.308. 10. Treasury Bonds A) Bonds with no maturities but interest issued by the US treasury. B) Interest bearing obligations issued by the US Treasury with maturities. C) Obligations issued by the US Treasury. D) None of above. Show Answer Correct Answer: B) Interest bearing obligations issued by the US Treasury with maturities. 11. To calculate the required rate of returns from a stock or portfolio, the equation is used: A) Security Market Line. B) Regression. C) Sharpe Ratio. D) None of above. Show Answer Correct Answer: A) Security Market Line. 12. Suzie owns five different bonds and twelve different stocks. Which one of the following terms most applies to her investments? A) Index. B) Portfolio. C) Collection. D) Risk-free. Show Answer Correct Answer: B) Portfolio. 13. If you need money within five years you should ..... A) Save. B) Invest. C) Borrow. D) Get a job. Show Answer Correct Answer: A) Save. 14. A portfolio consists of $ 15, 400 in Stock M and $ 23, 900 invested in Stock N. The expected return on these stocks is 9.20 percent and 12.60 percent, respectively. What is the expected return on the portfolio? A) 11.27. B) 10.25. C) 11.55. D) 11.89. Show Answer Correct Answer: A) 11.27. 15. You have a portfolio that is equally invested in Stock F with a beta of 1.07, Stock G with a beta of 1.44, and the risk-free asset. What is the beta of your portfolio? A) 1.67. B) .84. C) 0.96. D) 1.34. Show Answer Correct Answer: B) .84. 16. The expected return on an investment is ..... A) Less than required return. B) Equal to required return. C) Calculated by taking the mean of the distribution of possible returns. D) Equivalent to the actual return. Show Answer Correct Answer: C) Calculated by taking the mean of the distribution of possible returns. 17. What happens when Beta < 1.0 A) The security is riskier than the average stock. B) The security is as risky as the average stock. C) The security is less risky as the average stock. D) None of above. Show Answer Correct Answer: C) The security is less risky as the average stock. 18. Mutual Funds A) Investment company that pools the money of many investors to buy securities. B) Investment company uses the money of a investor to buy securities then pays them back later with interest. C) Banking company that pools the money of many investors to buy securities. D) None of above. Show Answer Correct Answer: A) Investment company that pools the money of many investors to buy securities. 19. What is required returns? A) Returns you actually get. B) Returns an investor requires given the riskiness of the stock and returns available on other investments. C) Returns an investor who buys the stock expects to get in the future. D) None of above. Show Answer Correct Answer: B) Returns an investor requires given the riskiness of the stock and returns available on other investments. 20. Slope of the security market line is A) Limitations of CAPM. B) Reward-to-risk ratio. C) Security market line. D) Applications of CAPM. Show Answer Correct Answer: B) Reward-to-risk ratio. ← PreviousNext →Related QuizzesFinance QuizzesRisk And Return Quiz 1Risk And Return Quiz 2Risk And Return Quiz 3Risk And Return Quiz 5Risk And Return Quiz 6Risk And Return Quiz 7 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books