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WorksheetsCHAPTER 3: RISK AND RETURN
Total questions: 10
Worksheet time: 10mins
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
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
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
Investment A has an expected return of 15% per year, while Investment B has an expected return of 12% per year. A rational investor will choose
Investment A because of the higher expected return.
Investment B because a lower return means lower risk.
Investment A if A and B are of equal risk.
Investment A only if the standard deviation of returns for A is higher than the standard deviation of returns for B.
A stock is expected to return 11% in a normal economy, 19% if the economy booms, and lose 8% if the economy moves into a recessionary period. Economists predict a 65% chance of a normal economy, a 25% chance of a boom, and a 10% chance of a recession. What is the expected return on the stock?
11.10%
12.06%
11.98%
11.23%
Risk is the chance that the actual return deviate from the expected return.
Which is the riskiest investment?
Investment A: ER = 22%; SD = 10%
Investment B: ER = 24%; SD = 12%
Investment C: ER = 21%; SD = 14%
Investment D: ER = 20%; SD = 11%
Event 1: BNM announced an increase in interest rate resulted an increase of 1% company's cost of financing.
Event 2: A fire caused by an accident at one of the company's store resulted in a huge loss for the company.
Determine the type of risk that can be associated to each of the events.
Unsystematic risk and Unsystematic risk
Unsystematic risk and Systematic risk
Systematic risk and Systematic risk
Systematic risk and Unsystematic risk
