1. Which of these is a measure summarizing the overall past performance of an investment?
Average return
Dollar return
Market return
Percentage return
2. Which of the following is the reward investors require for taking risk?
Market risk premium
Required return
Risk-free rate
Risk premium
3. Which of the following is defined as the volatility of an investment, which includes firm specific risk as well as market risk?
Market risk
Total risk
Diversifiable risk
Standard deviation
4. Which of these is the set of probabilities for all possible occurrences?
Market probabilities
Probability distribution
Probability
Stock market bubble
5. Which of these is the investor's combination of securities that achieves the highest expected return for a given risk level?
Efficient portfolio
Total portfolio
Optimal portfolio
Modern portfolio
6. To find the percentage return of an investment:
divide the dollar return by the investment's value at the beginning of the period.
multiply the dollar return by the investment's value at the beginning of the period.
multiply the dollar return by the investment's value at the end of the period.
divide the dollar return by the investment's value at the end of the period.
7. Which of the following is an index that tracks 500 companies, which allows for a great deal of diversification?
Fortune 500
Wall Street Journal
Nasdaq
S&P 500
8. Which of these is the line on a graph of return and risk (standard deviation) from the risk-free rate through the market portfolio?
Efficient market line
Capital market line
Efficient market hypothesis
Capital asset pricing line
9. Which of the following is a model that includes an equation that relates a stock's required return to an appropriate risk premium?
Efficient markets
Beta
Behavioral finance
Asset pricing
10. Which of the following is data that includes past stock prices and volume, financial statements, corporate news, analyst opinions, etc.?
Generally accepted accounting principles
Public information
Privately held information
Audited financial statements
11. Which of the following are the stocks of small companies that are priced below $1 per share?
Penny stocks
Hedge fund stocks
Bargain stocks
Stock market bubble stocks
12. TechNo stock was $25 per share at the end of last year. Since then, it paid a $1.50 per share dividend last year. The stock price is currently $23. If you owned 300 shares of TechNo, what was your percent return?
6 percent
-2 percent
6.5 percent
-8 percent
13. Which of the following is another term for market risk?
Modern portfolio risk
Firm specific risk
Total risk
Nondiversifiable risk
14. Investor enthusiasm causes an inflated bull market that drives prices too high, ending in a dramatic collapse in prices is known as:
privately held information.
efficient market.
behavior finance.
stock market bubble.
15. Which of the following is defined as the portion of total risk that is attributable to firm or industry factors and can be reduced through diversification?
Modern portfolio risk
Firm specific risk
Market risk
Total risk
16. Which of the following is a true statement?
If a firm takes on riskier new projects over time, the firm itself will become less risky.
Firms can quite possibly change their stocks' risk level by substantially changing their business.
The risk and return that a firm experienced in the past is also the risk level for its future.
If a firm takes on less risky new projects over time, the firm itself will become more risky.
17. Which of these is similar to the Capital Market Line, except that risk is characterized by beta instead of standard deviation?
Security market line
Probability market line
Stock market line
Market risk line
18. Which of these includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment?
Portfolio
Average return
Market return
Dollar return
19. In theory, which of these is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate?
Efficient market
Market portfolio
Stock market bubble
Probability distribution
20. We commonly measure the risk-return relationship using which of the following?
Expected returns
Correlation coefficient
Coefficient of variation
Standard deviation