Davenport FINC620 week 3 quiz

Jun 25th, 2016
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Question Question 1 The variance of Stock A is .004, the variance of the market is .007 and the covariance between the two is .0026. What is the correlation coefficient? A. .9285 B. .8542 C. .5010 D. .4913 E. .3510 Standard deviation of A = .06325, Standard deviation of the market = .08366 CORR = COV/(SDa.(SDm) = .0026/(.06325)(.08366) = .4913 2 points Save Answer Question 2 Which one of the following is an example of systematic risk? A. the price of lumber declines sharply B. airline pilots go on strike C. the Federal Reserve increases interest rates D. a hurricane hits a tourist destination E. people become diet conscious and avoid fast food restaurants 2 points Save Answer Question 3 According to the Capital Asset Pricing Model: A. the expected return on a security is negatively and non-linearly related to the security's beta. B. the expected return on a security is negatively and linearly related to the security's beta. C. the expected return on a security is

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Davenport FINC620 week 3 quizReport this Question as InappropriateQuestionQuestion 1The variance of Stock A is .004, the variance of the market is .007 and the covariance betweenthe two is .0026. What is the correlation coefficient?A. .9285B. .8542C. .5010D. .4913E. .3510Standard deviation of A = .06325, Standard deviation of the market = .08366CORR = COV/(SDa.(SDm) = .0026/(.06325)(.08366) = .49132 points Save AnswerQuestion 2Which one of the following is an example of systematic risk?A. the price of lumber declines sharplyB. airline pilots go on strikeC. the Federal Reserve increases interest ratesD. a hurricane hits a tourist destinationE. people become diet conscious and avoid fast food restaurants2 points Save AnswerQuestion 3According to the Capital Asset Pricing Model:A. the expected return on a security is negatively and non-linearly related to the security's beta.B. the expected return on a security is negatively and linearly related to the security's beta.C. the expected return on a security is positively and linearly related to the security's variance.D. the expected return on a security is positively and non-linearly related to the security's beta.E. the expected return on a security is positively and linearly related to the security's beta.2 points Save AnswerQuestion 4Which one of the following would indicate a portfolio is being effectively diversified?A. an increase in the portfolio betaB. a decrease in the portfolio betaC. a

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