# Test Bank Chap 2 Fin400 Essay

13496 Words Jul 18th, 2016 54 Pages
CHAPTER 2
RISK AND RETURN: PART I

(Difficulty: E = Easy, M = Medium, and T = Tough)

True-False

Easy:

(2.2) Payoff matrix Answer: a Diff: E

[i]. If we develop a weighted average of the possible return outcomes, multiplying each outcome or "state" by its respective probability of occurrence for a particular stock, we can construct a payoff matrix of expected returns.

a. True b. False

(2.2) Standard deviation Answer: a Diff: E
[ii]. The tighter the probability distribution of expected future returns, the smaller the risk of a given investment as measured by the standard deviation.

a. True b. False

(2.2) Coefficient of variation Answer: a Diff: E
[iii]. The coefficient of variation,
False

(2.3) CAPM and risk Answer: a Diff: E
[viii]. According to the Capital Asset Pricing Model, investors are primarily concerned with portfolio risk, not the isolated risks of individual stocks. Thus, the relevant risk is an individual stock's contribution to the overall riskiness of the portfolio.

a. True b. False

(2.3) Portfolio risk Answer: b Diff: E
[ix]. When adding new securities to an existing portfolio, the higher or more positive the degree of correlation between the new securities and those already in the portfolio, the greater the benefits of the additional portfolio diversification.

a. True b. False

(2.3) Portfolio risk Answer: b Diff: E
[x]. Portfolio diversification reduces the variability of the returns on each security held in the portfolio.

a. True b. False

(2.3) Portfolio return Answer: b Diff: E
[xi]. The realized portfolio return is the weighted average of the relative weights of securities in the portfolio multiplied by their respective expected returns.

a. True b. False

(2.3) Market risk Answer: a Diff: E
[xii]. Market risk refers to the tendency of a stock to move with the general stock market. A stock with above-average market risk will tend to be more volatile than an average stock, and it will definitely have a beta which is greater than 1.0.

a. True b. False

(2.3) Market risk Answer: b Diff: E
[xiii]. Diversifiable

## Related Documents

• ###### Essay Test Bank Communication

ch3 Student: ___________________________________________________________________________ 1. Maintaining goodwill within an organization can improve a firm's financial performance. True False 2. Goodwill is not important in government organizations. True False 3. More and more organizations are realizing that treating employees well is financially wise as well as ethically sound. True False 4. Goodwill is important externally but does not need to be considered when communicating…

Words: 14188 - Pages: 57
• ###### Essay test bank

Difficulty 1 Easy 2 Medium 3 Hard Reference link Topic TF01.01 Strategy is a detailed plan and a program of instructions that every member of the organization must carefully follow to ensure success F 1 Introduction and objectives Strategy definition TF01.02 Strategy is a unifying theme and a general guideline T 1 Introduction and objectives Strategy definition TF01.03 For most firms, luck appears to be the largest factor explaining whether they fail or succeed F 2 The role of…

Words: 5495 - Pages: 22
• ###### Test Bank Essay

interest rate is 8 percent, then the present value of \$1,000 to be received in 4 years is \$735.03. ANS: T DIF: 2 REF: 27-1 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Present value MSC: Applicative 2. If a savings account pays 5 percent annual interest, then the rule of 70 tells us that the account value will double in approximately 14 years. ANS: T DIF: 2 REF: 27-1 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Compounding MSC:…

Words: 27974 - Pages: 112
• ###### Test Bank for Essay

situation? B. What are the key products or service attributes demanded by consumers? C. Where does the company need to go from here? D. How should it get there? E. All of these are pertinent in evaluating a company's business prospects. 2. A company's strategy concerns A. its market focus and plans for offering a more appealing product than rivals. B. how it plans to make money in its chosen business. C. management's action plan for running the business and conducting operations—its…

Words: 11498 - Pages: 46
• ###### Essay 9e Chapter 2 Test

Chapter 2: Foundations of Quality Management TRUE/FALSE 1. Deming laid out a “quality improvement program” for companies such as Ford, GM, and Procter & Gamble, when invited to work with them to improve their quality. ANS: F DIF: Difficulty: Easy NAT: BUSPROG: Analytic TOP: A-Head: The Deming Philosophy KEY: Bloom's: Knowledge 2. Unlike other management gurus and consultants, Deming defined and described quality precisely. ANS: F DIF: Difficulty: Easy NAT: BUSPROG: Analytic TOP: A-Head:…

Words: 4725 - Pages: 19
• ###### Essay Test Bank

situation in which the probability of loss is one. B) any situation in which the probability of loss is zero. C) uncertainty concerning the occurrence of loss. D) the probability of a loss occurring. Answer: C Question Status: Previous Edition 2) Objective risk is defined as A) the probability of loss. B) the relative variation of actual loss from expected loss. C) uncertainty based on a person's mental condition or state of mind. D) the cause of loss. Answer: B Question Status: Previous…

Words: 2551 - Pages: 11
• ###### Test 2 Essay

to pass through once filtered. C: A disposable needle would hopefully be discarded into a biohazard bin, but if it had to be reused it could be cleaned by using hot air sterilization. It places the needle in an “oven” of 170 degree Celsius for around 2 hours. That would kill the bacteria and allow for reuse. D: I would use Ionizing radiation for this as well, it kills the DNA and rids of the bacteria at the same time. Tissus from out body would by hight contagious of any diseases.…

Words: 942 - Pages: 4
• ###### Essay Survey Accounting 3rd Ed Chap 2 Test

____ 1. To have a strong internal control system, a business must have good administrative controls. Administrative controls include: A. B. C. D. the reconciliation of the bank statement. the accuracy of the recording procedures. assessing compliance with company policies. maintenance of accurate inventory records. 2. Which of the following statements concerning internal controls is true? A. Internal administrative controls are designed to limit the amount of funds spent on investments. B.…

Words: 19838 - Pages: 80
• ###### Essay on Test Bank

business. Answer: TRUE Diff: 1 Section: 1.0 Introduction Skill: Factual AACSB Tag: Reflective 2) Projects are typically ongoing, day-to-day activities that have goods and services as outputs. Answer: FALSE Diff: 2 Section: 1.1 What Is a Project? Skill: Definition AACSB Tag: Reflective 3) A typical project stays within functional and organizational boundaries. Answer: FALSE Diff: 2 Section: 1.1 What Is a Project? Skill: Definition AACSB Tag: Reflective 4) The special nature…

Words: 5368 - Pages: 22
• ###### Acct 201 test 2 Essay

discount E. FOB shipping point H. Purchase discount B. Credit period F. Gross profit I. Cash discount C. Discount period G. Merchandise inventory J. Trade discount D. FOB destination 1. Goods a company owns and expects to sell to its customers. G 2. Time period that can pass before a customer’s payment is due. B 3. Seller’s description of a cash discount granted to buyers in return for early payment. A 4. Reduction below list or catalog price that is negotiated in setting the price of goods…

Words: 5361 - Pages: 22