BUSI 420 Read & Interact Jordan, Miller Jr., & Dolvin Chapter 12 Liberty University
updated answers
(Value/Growth) stocks tend to have higher average returns over time.
Betas calculated usingBlank______data will be more stable.
True or false: A stock's beta is estimated as the slope of a line that uses the
market returns asxand the stock returns asy.
Which of the following is a component of the calculation for beta?
Stocks with a (small/large) market capitalization tend to have higher
average returns.
A stock with a beta (greater/less) than one will be more sensitive to
market movements.
Which of the following isnota component of the CAPM?
The most common index used to estimate U.S. stock betas is theBlank______.
The line that describes the relationship between systematic risk and expected
return is called theBlank______.
When examining the results of a linear regression, which of the following
provides an estimate of a stock's beta?
The fundamental relation between risk and return says that, in an active,
competitive market, the reward-to-risk ratio should beBlank______.
True or false: A stock that has a deviation that is higher than the market will also
have a beta that is above 1.
Suppose Asset A has a reward-to-risk ratio of 7.50%, while Asset B has a reward-
to-risk ratio of 5.5%. If the risk-free rate is 3%, investors should
preferBlank______.
Which of the following securities would have the highest required return?
Given a portfolio made up of Asset A and the risk-free rate, the percentage
invested in ABlank______.
The capital asset pricing model is a theory ofBlank______for securities in a
competitive capital market.
True or false: A portfolio's beta is a weighted average of the betas from the
individual assets in the portfolio.
The graphical representation of the linear relationship between systemic risk and
expected return in financial markets is called the market line.
Which of the following is not a reason why beta coefficient estimates would
differ?
True or false: In an active, competitive market, the reward-to-risk ratio should be
consistent across investments.
An average asset has a beta ofBlank______.
A reward-to-risk ratio of 10 percent means that the given asset has a risk
premium of 10 percent per unit ofBlank______.
True or false: On average, the actual return equals the expected return.
True or false: Given a portfolio made up of Asset A and the risk-free rate, the
percentage invested in A can never exceed 100 percent.
True or false: Assets with higher total risk will always have higher expected
returns.
The calculation of a portfolio's beta is similar to that of the calculation of a
portfolio'sBlank______.
______risk is eliminated by diversification.
True or false: Beta estimates will be constant across data providers.
True or false: The unsystematic portion of a return is unique to the investment.
The coefficient measures the relative systematic risk of an asset.
An announcement that a company is being placed under SEC investigation is an
example ofBlank______risk.
Actual return differs from the return because of the surprises that
occur during the year.
The expected return on an asset depends on itsBlank______risk.
True or false: If the Federal Reserve raises rates by 25 bps, in an efficient market
bond prices will always fall as a result.
Which of the following terms is not synonymous with unsystematic risk?
True or false: The unsystematic portion of a return is directly related to the
unsystematic portion of the return on other investments.
Uncertainties surrounding general economic conditions are examples
ofBlank______risk.
True or false: On average, the actual return equals the expected return.
Suppose that the investors believe the Federal Reserve, or Fed, is going to raise
rates by 25 bps. If the Fed announces that they are raising rates by 50 bps, the
surprise component of the announcement isBlank______bps.
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