You are watching: The intercept point of the security market line is the rate of return which corresponds to:
The _____ tells us that the expected return on a risky asset depends only on that asset"s nondiversifiable risk.efficient markets hypothesissystematic risk principleopen markets theoremlaw of one priceprinciple of diversification
The expected return on a portfolio considers which of the following factors?I. percentage of the portfolio invested in each individual securityII. projected states of the economyIII. the performance of each security given various economic statesIV. probability of occurrence for each state of the economyI and III onlyII and IV onlyI, III, and IV onlyII, III, and IV onlyI, II, III, and IV
The standard deviation of a portfolio:is a measure of that portfolio"s systematic risk.is a weighed average of the standard deviations of the individual securities held in that portfolio.measures the amount of diversifiable risk inherent in the portfolio.serves as the basis for computing the appropriate risk premium for that portfolio.can be less than the weighted average of the standard deviations of the individual securities held in that portfolio.
Which one of the following statements related to unexpected returns is correct?All announcements by a firm affect that firm"s unexpected returns.Unexpected returns over time have a negative effect on the total return of a firm.Unexpected returns are relatively predictable in the short-term.Unexpected returns generally cause the actual return to vary significantly from the expected return over the long-term.Unexpected returns can be either positive or negative in the short term but tend to be zero over the long-term.
Unexpected returns can be either positive or negative in the short term but tend to be zero over the long-term.
Which one of the following is an example of unsystematic risk?income taxes are increased across the boarda national sales tax is adoptedinflation decreases at the national levelan increased feeling of prosperity is felt around the globeconsumer spending on entertainment decreased nationally
Which one of the following is the best example of a diversifiable risk?interest rates increaseenergy costs increasecore inflation increasesa firm"s sales decreasetaxes decrease
The intercept point of the security market line is the rate of return which corresponds to:the risk-free rate.the market rate.a return of zero.a return of 1.0 percent.the market risk premium.
A stock with an actual return that lies above the security market line has:more systematic risk than the overall market.more risk than that warranted by CAPM.a higher return than expected for the level of risk assumed.less systematic risk than the overall market.a return equivalent to the level of risk assumed.
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The expected rate of return on a stock portfolio is a weighted average where the weights are based on the:number of shares owned of each stock.market price per share of each stock.market value of the investment in each stock.original amount invested in each stock.cost per share of each stock held.