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1. Diversifiable risk becomes minimal with an adequately diversified portfolio of stocks. At this point the beta of the portfolio could potentially help to reduce (dampen) what kind of risk?

a. Systematic risk.
b. Unsystematic risk.
c. None of the above.

2. Assuming that the S&P 500 Index is representative of the stock market, beta is...

a. The slope of the characteristic line.
b. The average relationship between a stock's returns and those of the S&P 500 Index price.
c. All of the above.

3. Assuming a return of 9% on your investment, compounded quarterly. How much would a $1,000 investment be worth in 8 years?

a. $1,992.56
b. $2,038.10
c. $2,048.92

4. Annuity problem (Use formula with PV of an annuity): A retirement plan guarantees to pay you or your estate a fixed amount for 25 years. At the time of retirement you will have $100,000 to your credit in the plan. The plan anticipates earning 7% interest annually over the period you receive benefits. How much will your annual benefit (payment) be assuming the first payment occurs one year from your retirement date?

a. $6,182
b. $8,101
c. $8,581

5. Bet is a term that measures the systematic risk of a security, or a portfolio of securities, relative to the systematic risk of ______________________.

a. The stock market.
b. The security market line.
c. None of the above.

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