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Fin 302 Quiz 1

The total dividend income from the investment is $1.60. Non-diversifiable or unsystematic risk is risk that is specific to a company like the sudden resignation of a key employee. The risk premium is the excess return earned by taking on risky investments and the risk premium is greater when volatility of returns is higher.

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Navidul Islam
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87 views

Fin 302 Quiz 1

The total dividend income from the investment is $1.60. Non-diversifiable or unsystematic risk is risk that is specific to a company like the sudden resignation of a key employee. The risk premium is the excess return earned by taking on risky investments and the risk premium is greater when volatility of returns is higher.

Uploaded by

Navidul Islam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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One year ago, you purchased a stock at a price of $32.50.

The stock pays


quarterly dividends of $.40 per share. Today. Me stock is worth $34.60 per
share. What is Me total amount of your dividend income to data from this
investment?
$2.10
$0.40
$3.70
$1.60

The excess return you earn lay moving from a relatively risk-free investment
to a risky investment is called the •
Risk Premium
Arithmetic Average Return
Inflation Premium
Geometric Average Return
Time Premium

Which one of the following is an example of a non-diversifiable risk or Un-


systemic? *
a key employee suddenly resigns and accepts employment with a key competitor
a well managed firm reduces its work force and automates several jobs
a well respected chairman of the Federal Reserve suddenly resigns
a well respected president of a firm suddenly resigns
a poorly managed firm suddenly goes out of business due to lack of sales

Which one of the following is a correct statement concerning risk premium?


The greater the volatility of returns, the greater the risk premium.
The lower the volatility of returns, the greater the risk premium.
The lower the average rate of return, the greater the risk premium.
The risk premium is not correlated to the average rate of return.
The risk premium is not affected by the volatility of returns.
The linear relation between an asset's expected return and its Beta coefficient
is the:
A) reward to risk ratio
B) portfolio weight
C) portfolio risk
D) security market line
E) market to risk premium

Which one of the following is an example of systematic risk?


a) A city imposes an additional one percent sales tax on all products.
b) A flood washes away a firm's warehouse.
c) Investors panic causing security prices around the globe to fall precipitously.
d) Corn prices increase due to increased demand for alternative fuels.
e) A toymaker has to recall its top-selling toy.
f) The Federal Reserve unexpectedly announces an increase in target interest rates.

When computing the expected return on a portfolio of stocks the portfolio


weights are based on the:
number of shares owned in each stock.
price per share of each stock.
market value of the total shares held in each stock.
original amount invested in each stock.
cost per share of each stock held.

What are the arithmetic and geometric average returns for a stock with
annual returns of 4%, 9%, -6%, and 18%?
5.89%; 6.25%
6.25%; 5.89%
6.25%; 8.33%
8.3%; 5.89%
8.3%; 6.25%
The beta of an individual security is calculated by:
(a) dividing the covariance of the security with the market by the variance of the market.
(b) dividing the correlation of the security with the market by the variance of the market.
(c) multiplying the variance of the market by the covariance of the security with the market.
(d) multiplying the variance of the market by the correlation of the security with the market

When computing the expected return on a portfolio of stocks the portfolio


weights are based on the:
number of shares owned in each stock.
price per share of each stock.
market value of the total shares held in each stock.
original amount invested in each stock.
cost per share of each stock held

The standard deviation for a set of stock returns can be calculated as the:
A. positive square root of the average return
B. average squared difference between the actual and the average return
C. positive square root of the variance
D. variance squared

The average compound return earned per year over a multi-year period is
called the _____ average return.
a. arithmetic
b. standard
c. variant
d. geometric
e. real

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