Site MapHelpFeedbackMultiple Choice Quiz
Multiple Choice Quiz
(See related pages)



1

According to the Capital Asset Pricing Model (CAPM), a well-diversified portfolio's rate of return is a function of
A)unique risk.
B)reinvestment risk.
C)market risk.
D)unsystematic risk.
E)none of the above
2

The market portfolio has a beta of
A)0.25.
B)-1.
C)1.
D)0.5.
E)none of the above
3

Which statement is not true regarding the market portfolio?
A)It includes all publicly traded financial assets.
B)It is the tangency point between the capital market line and the indifference curve.
C)All securities in the market portfolio are held in proportion to their market values.
D)It lies on the efficient frontier.
E)None of the above are true.
4

The market risk, beta, of a security is equal to
A)the covariance between the security's return and the market return divided by the variance of the market's returns.
B)the covariance between the security and market returns divided by the standard deviation of the market's returns.
C)the variance of the security's returns divided by the covariance between the security and market returns.
D)the variance of the security's returns divided by the variance of the market's returns.
E)none of the above.
5

According to the Capital Asset Pricing Model (CAPM), the expected rate of return on any security is equal to
A)Rf + σ [E(RM)].
B)Rf + β[E(RM) - Rf].
C)Rf + σ [E(RM) - Rf].
D)E(RM) + Rf.
E)none of the above
6

According to the Capital Asset Pricing Model (CAPM), fairly priced securities
A)have positive betas.
B)have positive alphas.
C)have negative betas.
D)have zero alphas.
E)none of the above
7

In a well diversified portfolio
A)market risk is negligible.
B)unsystematic risk is negligible.
C)systematic risk is negligible.
D)nondiversifiable risk is negligible.
E)none of the above
8

What is the expected return of a zero-beta security?
A)The risk-free rate.
B)Zero rate of return.
C)A negative rate of return.
D)The market rate of return.
E)None of the above are true.
9

Assume that a security is fairly priced and has an expected rate of return of 0.13. The market expected rate of return is 0.13 and the risk-free rate is 0.04. The beta of the stock is
A)1.25.
B)1.7.
C)1.
D)0.95.
E)none of the above
10

You invest 50% 0f your money in security A with a beta of 1.6 and the rest of your money in security B with a beta of 0.7. The beta of the resulting portfolio is
A)1.40.
B)1.15.
C)0.36.
D)1.08.
E)0.80.





To learn more about the book this website supports, please visit its Information Center.
(c)2005 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


bodie6eOnline Learning Center with Powerweb

Home > Chapter 9 > Multiple Choice Quiz