FIN 351 WEEK 7 QUIZ

Question 1.	Question :	(TCO 7) According to the text, a risk-averse investor _____.

 	


Question 2.	Question :	(TCO 7) The capital market line (CML), as defined by the capital asset pricing model, is characterized by all of the following except _____.

 	

 	

Question 3.	Question :	(TCO 7) If the _____ of any individual stock is known, an investor can use the _____ to determine the expected rate of return on that stock.

 	



Question 4.	Question :	(TCO 7) Which of the following is NOT a problem associated with proving the validity of the security market line?

 	


Question 5.	Question :	(TCO 7) The standard deviation of a risk-free asset is _____.

 	


Question 6.	Question :	(TCO 7) Assume a portfolio has the possibility of returning 3%, 6%, 11%, or 16%, with the likelihood of 20%, 30%, 25%, and 25%, respectively. The expected value of the portfolio is _____.

 	


Question 7.	Question :	(TCO 7) If the market rate of return is 10% and the beta on a particular stock is .78, the return on the stock will be _____.




Question 8.	Question :	(TCO 7) For two investments with a correlation coefficient (rij) greater than +1, the portfolio standard deviation will be _____ the weighted average of the individual investments' standard deviation.

 	



Question 9.	Question :	(TCO 7) One way to express the tradeoff between risk and return for an individual security is through _____.

 	



Question 10.	Question :	(TCO 7) Using the formula for the security market line (Formula 21-7), if the risk-free rate (RF) is 5%, the market rate of return (KM) is 12%, and the beta (bi) is .80, compute the anticipated return for stock i (Ki).