IEE1115 Quiz 7/19

Which of the following investment strategies is based on short-term price trends and market anomalies?

• Value investing

• Growth investing

• Factor investing

• Technical and momentum investing

As long as the inflation rate is positive, the real rate of return on a security will be ____ the nominal rate of return.

• greater than

• equal to

• less than

• greater than or equal to

• unrelated to

Inside information has the least value when financial markets are:

• weak form efficient.

• semiweak form efficient.

• semistrong form efficient.

• strong form efficient.

• inefficient.

Stock A has a beta of 1.2, and Stock B has a beta of 0.6. Which of the following statement is true about these securities?

• The addition of Stock A would reduce portfolio risk more than the addition of Stock B.

• The addition of Stock B would increase portfolio risk more than the addition of Stock A.

• The required return for Stock A is greater than the required return for Stock B.

• The required return for Stock B is greater than the required return for Stock A.

You have developed the following data on three stocks:

Stock / Standard Deviation / Beta

A / 0.15 / 0.79

B / 0.25 / 0.61

C / 0.20 / 1.29

If you are a risk minimizer, you should choose Stock ____ if it is held in isolation and Stock ____ if it is to be held as part of a well-diversified portfolio.

• A; A

• A; B

• B; A

• C; A

• C; B

Which one of the following should earn the highest risk premium based on CAPM?

• Diversified portfolio with returns similar to the overall market

• Stock with a beta of 1.38

• Stock with a beta of 0.74

• U.S. Treasury bill

• Portfolio with a beta of 1.01