FIN 534 Week 5 Quiz 4

Preview (5 of 14 Pages)

100%

Purchase to unlock

FIN 534 Week 5 Quiz 4 - Page 1 preview image

Loading page ...

FIN 534 WEEK 5 QUIZ 4Question 1For a portfolio of 40 randomly selected stocks, which of the following is most likely to be true?The riskiness of the portfolio is greater than the riskiness of each of the stocks if each was held inisolation.Theriskiness of the portfolio is the same as the riskiness of each stock if it was held in isolation.The beta of the portfolio is less than the average of the betas of the individual stocks.The beta of the portfolio is equal to the average of the betas of the individual stocks.The beta of the portfolio is larger than the average of the betas of the individual stocks.Question 2Which of the following statements is CORRECT?The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.If you found a stock with a zero historical beta and held it as the only stock in your portfolio, youwould by definition have a riskless portfolio.The beta coefficient of a stock is normally found by regressing past returns on a stock againstpast market returns. One could also construct a scatter diagram of returns on the stock versusthose on the market, estimate the slope of the line of best fit, and use it as beta. However, thishistorical beta may differ from the beta that exists in the future.The beta of a portfolio of stocks is always larger than the betas of any of the individual stocks.It is theoretically possible for a stock to have a beta of 1.0. If a stock did have a beta of 1.0, then,at least in theory, its required rate of return would be equal to the risk-free (default-free) rate ofreturn, rRF.Question 3Stock A’s beta is 1.5 and Stock B’s beta is 0.5. Which of the following statements must be trueabout these securities? (Assume market equilibrium.)When held in isolation, Stock A has more risk than Stock B.Stock B must be a more desirable addition to a portfolio than A.

Preview Mode

This document has 14 pages. Sign in to access the full document!

Report

Study Now!

Document Details

Related Documents

Finance 534 Week 11 Quiz 10

Finance 534 Week 8 Quiz 7

Finance 534 Week 5 Quiz 4

FIN 534 Week 1 Corporate Finance and the Great Recession

FIN 534 - Chapter 1 Quiz Analysis: Key Concepts in Financial Markets and Corporate Structure

FIN 534 Final Exam PART 2

FIN 534 Week 4 Quiz 3

FIN 534 Midterm Exam Part 1& 2

FIN 534 Financial Markets, Corporate Structures, and Investment Transactions

Texas Life and Health Insurance Exam 150 Questions

Company

Explore

Study Tools