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- 1. Multiple Choice
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
- 2. Multiple Choice
Investors can eliminate what type of risk by diversifying?
Systematic risk
Unsystematic risk
Beta risk
Total risk
- 3. Multiple Choice
Ahmad is considering investing in stocks. Which is the less risky investment?
Stock A: SD = 10%; E(R) = 10%
Stock B: SD = 6%; E(R) = 10%
Stock C: SD = 8%; E(R) = 12%
Stock D: SD = 20%; E(R) = 24%
- 4. Multiple Choice
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%
- 5. Multiple Choice
Below are all types of return except:
Actual return
Expected return
Possible return
Required return
- 6. Multiple ChoiceWhich of the following statements about risk is TRUE?Risk is about how uncertain your returns could be.Risk is about how much money you can lose.A risky asset is more likely to deliver higher return than a less risky asset.If an asset's risk increases, its price will also increase.
- 7. Multiple Choice
From the probability distribution provided, the expected return of the asset is closest to:
9%
6.7%
10%
20%
- 8. Multiple Choice
Consider the following 4 assets. If you have to select only one, which one would you pick if you are risk-averse?
D
A
B
C
- 9. Multiple Choice
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
- 10. Multiple Choice
Plunging oil prices is an example of which of the following types of investment risk?
company risk
industry risk
political risk
inflation risk
- 11. Multiple Choice
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.
- 12. Multiple Choice
You are considering investing in Ford Motor Company. Which of the following are examples of diversifiable risk?
I. Risk resulting from possibility of a stock market crash.
II. Risk resulting from uncertainty regarding a possible strike against Ford.
III. Risk resulting from an expensive recall of a Ford product.
IV. Risk resulting from interest rates decreasing.
I only
I and IV
I, II, III, IV
II, III
- 13. Multiple Choice
Which one of the following guarantees is offered to common stock investors?
Guarantee to receive dividends
Guarantee to receive capital gains
Guarantee only to receive a refund of principal
No guarantees of any form
- 14. Multiple Choice
The wider the dispersion of returns on a stock, the:
lower the expected rate of return
higher the standard deviation
lower the real rate of return
lower the variance
- 15. Multiple Choice
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%
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