Corporate Investment and Finance

Oct 20th, 2015
RockCafe
Category:
Accounting
Price: $5 USD

Question description

1.  True --False Treasury bills have provided the highest average return, both in nominal terms and in real terms, between 1900-2006. 

2.  True --False Risk premium is the difference between the security return and the Treasury bill return. 

3.  True --False According to the authors, a reasonable range for the risk premium in the United States is 5% to 8%. 

4.  True --False The standard statistical measures of spread are beta and covariance. 

5.  True --False Diversification reduces risk because prices of different securities are perfectly positively correlated. 

6.  True --False The risk that can be eliminated by diversification is called systematic, non-diversifiable, or market risk. 

7.  True --False The beta of a well-diversified portfolio is equal to the value weighted average beta of the securities included in the portfolio. 

8.  True --False The average beta of all stocks in the market is zero. 

9.  True --False A portfolio with a beta of one offers an expected return equal to the market risk premium not the risk free rate plus the beta times the market risk premium.  True --False The higher the standard deviation of a single stock the higher is its beta (always). 


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