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Multiple Choice
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1

Because investors dislike uncertainty, they will require _________ rates of return from risky investments.
A)higher
B)lower
C)the same
D)none of the above
2

__________ is the variability of possible outcomes from a given investment.
A)Beta
B)Return
C)Risk
D)Variance
3

Generally, the larger the standard deviation of an investment's expected outcomes, the _________ the risk.
A)higher
B)lower
C)less volatile
D)none of the above
4

When stocks are held in a portfolio instead of individually, which measure of risk is appropriate?
A)standard deviation
B)beta
C)coefficient of variation
D)none of the above
5

If an individual stock's beta is higher than 1.0, that stock is:
A)exactly as risky as the market.
B)riskier than the market.
C)less risky than the market.
D)none of the above
6

The component of the risk-adjusted discount rate that is derived from the risk of Treasury securities is:
A)risk premium
B)cost of capital
C)call premium
D)risk-free rate
7

The component of the risk-adjusted discount rate that compensates the investor for holding risky assets is the:
A)risk-free rate
B)cost of capital
C)risk premium
D)none of the above
8

The standard deviation measures:
A)portfolio risk
B)the risk of an individual security
C)the risk of two securities, with different expected returns, compared to each other
D)none of the above
9

Coefficient of variation measures:
A)portfolio risk
B)the risk of an individual security
C)the risk of two securities, with different expected returns, compared to each other.
D)none of the above
10

The automobile industry and the heavy manufacturing industry probably have expected returns with a ___________ correlation.
A)positive
B)perfect positive
C)negative
D)slightly negative





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