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WorksheetsChapter 6: Risk & Return
Total questions: 11
Worksheet time: 6mins
Which one of the following is an example of unsystematic risk?
Decrease in the national level of inflation
Adoption of a national sales tax
An increased feeling of global prosperity
Hannan Medispa plan to be listed in Bursa Malaysia
The principle of diversification tells us that:
concentrating an investment in two or three large stocks will eliminate all of the unsystematic risk.
concentrating an investment in three companies all within the same industry will greatly reduce the systematic risk.
spreading an investment across many diverse assets will eliminate some of the total risk.
spreading an investment across five diverse companies will not lower the total risk.
Total risk is measured by _____ and systematic risk is measured by _____.
beta; standard deviation
alpha; beta
standard deviation; beta
standard deviation; variance
Suzie owns five different bonds and twelve different stocks. Which one of the following terms most applies to her investments?
Index
Portfolio
Collection
Risk-free
Risk can be defined as uncertainty concerning the actual return that an investment will generate.
True
False
Which of the following is an example of systematic risk?
Hilton Hotel declares lower than expected earnings.
Petronas announces high
record earnings.
The government raises interest rates unexpectedly.
Coca-Cola announces higher than expected earnings
By diversifying, investors can eliminate ____.
Systematic risk
Unsystematic risk
Beta risk
Total risk
Typically as the potential reward increases, so does the potential risk.
True
False
___ reduces risk by spreading investment money among a wide array of investment tools.
Risk tolerance
Risk profile
Portfolio Diversification
Buying an individual stock
Which of the following investment has higher risk and provide a higher return?
Savings account
Bond market
Mutual fund
Stock market
The information relating to the expected return of a given security (i.e., CAPM) is as follows. The market return is 8.5%, the risk-free rate is 1.5%, and the security Beta is 1.50. (Note: CAPM is given as rj = Rf + [Bj x (rm-Rf)]). Find the required return of the given security.
12%
7%
10.5%
3%
