Risk and Return

Which of the following is an example of systematic risk?

• BHP Billiton posts lower than expected earnings.

• Woolworths announces record earnings.

• The government raises interest rates unexpectedly.

• Coca-Cola announces higher than expected earnings

Investors can eliminate what type of risk by diversifying?

• Systematic risk

• Unsystematic risk

• Beta risk

• Total risk

Ahmad is considering investing in stocks. Which is the less risky investment?

• Stock A: SD = 10%; E(R) = 10%

• Stock B: SD = 6%; E(R) = 10%

• Stock C: SD = 8%; E(R) = 12%

• Stock D: SD = 20%; E(R) = 24%

Probability = 15%; Return = -5%

Probability = 20%; Return = 10%

Probability = 30%; Return = 15%

Probability = 35%; Return = 25%

What is the expected rate of return on the investment?

• 15.4%

• 14.5%

• 15.5%

• 16%

Below are all types of return except:

• Actual return

• Expected return

• Possible return

• Required return

Which of the following statements about risk is TRUE?

• Risk is about how uncertain your returns could be.
• Risk is about how much money you can lose.
• A risky asset is more likely to deliver higher return than a less risky asset.
• If an asset's risk increases, its price will also increase.

From the probability distribution provided, the expected return of the asset is closest to:

• 9%

• 6.7%

• 10%

• 20%

Consider the following 4 assets. If you have to select only one, which one would you pick if you are risk-averse?

• D

• A

• B

• C

If employees of a company go on strike, this is an example of which types of investment risk?

• company risk

• industry risk

• political risk

• inflation risk

Plunging oil prices is an example of which of the following types of investment risk?

• company risk

• industry risk

• political risk

• inflation risk