variance
The average squared difference between the actual return and the average return is called the:
positive square root of the variance.
The standard deviation for a set of stock returns can be calculated as the:
normal distribution
A symmetric, bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the
risk premium
The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the
total return
The capital gains yield plus the dividend yield on a security is called the:
represent the smallest twenty percent of the companies listed on the NYSE.
A portfolio of small-company common stocks is best described as the stocks of the firms which:
small-company stocks
Based on the period of 1926 through 2014, _____ have tended to outperform other securities over the long-term.
the risk premium on long-term corporate bonds has exceeded the risk premium on long-term government bonds.
On average, for the period 1926 through 2014
large-company stocks; long-term corporate bonds
Over the period of 1926 through 2014, the annual rate of return on _____ has been more volatile than the annual rate of return on _____.
small-company stocks, large-company stocks, long-term corporate bonds
Which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2014? Rank from highest to lowest.
U.S. Treasury bills
Which one of the following types of securities has tended to produce the lowest real rate of return for the period 1926 through 2014?
is over ten times as large as the standard deviation of U.S. Treasury bills.
The standard deviation of small-company stocks:
Italy
Which one of these countries tends to have the highest stock market risk premium?
United States, Australia, South Africa
Which group of countries tends to have the highest Sharpe ratios based on historical equity risk premiums and standard deviations of returns since 1900?
37
In 2008, the S&P 500 Index lost approximately what percent of its value?
Iceland
In 2008, which country experienced a decline in its stock market value in excess of 90 percent?
long-term U.S. Treasury bonds
In 2008, which asset class had the highest rate of return in the U.S.?
a weighted
The expected return on a portfolio is best described as ____ average of the expected returns on the individual securities held in the portfolio.
systematic
Risk that affects a large number of assets, each to a greater or lesser degree, is called _____ risk.
unsystematic
Risk that affects at most a small number of assets is called _____ risk.
spreading an investment across many diverse assets will eliminate idiosyncratic risk.
The principle of diversification tells us that:
beta coefficient.
The amount of systematic risk present in a particular risky asset, relative to the systematic risk present in an average risky asset, is called the particular asset's:
security market line
The linear relation between an asset's expected return and its beta coefficient defines the:
market risk premium
The slope of an asset's security market line is the:
a well-respected chairman of the Federal Reserve Bank suddenly resigns
Which one of the following is an example of a nondiversifiable risk?
total; systematic
Standard deviation measures _____ risk while beta measures ____ risk.
market value of the total shares held in each stock.
When computing the expected return on a portfolio of stocks the portfolio weights are based on the
is limited by the returns on the individual securities within the portfolio.
The expected return on a portfolio:
may be less than the variance of the least risky stock in the portfolio.
If a stock portfolio is well diversified, then the portfolio variance:
The standard deviation of a portfolio can often be lowered by changing the weights of the securities in the portfolio.
Which one of the following statements is correct concerning the standard deviation of a portfolio?
the Federal Reserve increases interest rates
Which one of the following is the best example of systematic risk?
beta of 1.0.
The systematic risk of the market is measured by a:
can be effectively eliminated through portfolio diversification.
Unsystematic risk:
an oil tanker runs aground and spills its cargo
Which one of the following is an example of unsystematic risk?
eliminate asset-specific risk.
The primary purpose of portfolio diversification is to:
a decrease in the portfolio standard deviation
Which one of the following would indicate a portfolio is being effectively diversified?
on
A security that is fairly priced will have a return _____ the security market line.
the risk-free rate of return.
The intercept point of the security market line is the rate of return which corresponds to:
yielded a higher return than expected for the level of risk assumed.
A stock with an actual return that lies above the security market line has:
minimum variance portfolio.
A dominant portfolio within an opportunity set that has the lowest possible level of risk is referred to as the:
systematic risk.
The measure of beta associates most closely with:
the dominant portion of the opportunity set.
An efficient set of portfolios is comprised of:
the risk-free rate.
A stock with a beta of zero would be expected to have a rate of return equal to:
move perfectly in sync with one another.
You have a portfolio comprised of two risky securities. This combination produces no diversification benefit. The lack of diversification benefits indicates the returns on the two securities:
+1 to -1.
The range of possible correlations between two securities is defined as:
move perfectly opposite to one another.
If the correlation between two stocks is -1, the returns on the stocks:
total; systematic
As we add more diverse securities to a portfolio, the ____ risk of the portfolio will decrease while the _____ risk will not.
The growth rate must be less than the discount rate.
Which one of these applies to the dividend growth model of stock valuation?
dividend yield.
Next year's annual dividend divided by the current stock price is called the:
capital gains
The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield.
four
In the formula, P3 = Div / R - g, the dividend is for period:
can be used to compute a stock price at any point in time.
The constant dividend growth model:
the present value of the future income that the stock is expected to generate.
The underlying assumption of the dividend growth model is that a stock is worth:
market values of all stocks to decrease.
Assume you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect the:
dividend yield plus the dividend growth rate.
The total return on a stock is equal to the:
risk, opportunities, accounting practices
A stock's PE ratio is primarily affected by which three factors?
future opportunities
Which one of these factors generally has the greatest impact on a firm's PE ratio?
price-sales ratio
Which one of these stock valuation methods is used for a non-dividend paying firm that is experiencing accounting losses?
was conducted in the primary market.
If the issuer of a stock receives the proceeds from a sale of that issuer's stock, then the sale:
Dealers buy at the bid price.
Which one of these statements is correct?
do not operate on the floor of a stock exchange.
Supplemental liquidity providers (SLPs):
guarantees the purchase price but not the order execution.
A limit order to buy:
cancelled at the end of the day if not executed.
A day order to sell at a limit of $32 will be
has a multiple market maker system.
NASDAQ
variance
The average squared difference between the actual return and the average return is called the:
positive square root of the variance.
The standard deviation for a set of stock returns can be calculated as the:
normal distribution
A symmetric, bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the
risk premium
The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the
total return
The capital gains yield plus the dividend yield on a security is called the:
represent the smallest twenty percent of the companies listed on the NYSE.
A portfolio of small-company common stocks is best described as the stocks of the firms which:
small-company stocks
Based on the period of 1926 through 2014, _____ have tended to outperform other securities over the long-term.
the risk premium on long-term corporate bonds has exceeded the risk premium on long-term government bonds.
On average, for the period 1926 through 2014
large-company stocks; long-term corporate bonds
Over the period of 1926 through 2014, the annual rate of return on _____ has been more volatile than the annual rate of return on _____.
small-company stocks, large-company stocks, long-term corporate bonds
Which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2014? Rank from highest to lowest.
U.S. Treasury bills
Which one of the following types of securities has tended to produce the lowest real rate of return for the period 1926 through 2014?
is over ten times as large as the standard deviation of U.S. Treasury bills.
The standard deviation of small-company stocks:
Italy
Which one of these countries tends to have the highest stock market risk premium?
United States, Australia, South Africa
Which group of countries tends to have the highest Sharpe ratios based on historical equity risk premiums and standard deviations of returns since 1900?
37
In 2008, the S&P 500 Index lost approximately what percent of its value?
Iceland
In 2008, which country experienced a decline in its stock market value in excess of 90 percent?
long-term U.S. Treasury bonds
In 2008, which asset class had the highest rate of return in the U.S.?
a weighted
The expected return on a portfolio is best described as ____ average of the expected returns on the individual securities held in the portfolio.
systematic
Risk that affects a large number of assets, each to a greater or lesser degree, is called _____ risk.
unsystematic
Risk that affects at most a small number of assets is called _____ risk.
spreading an investment across many diverse assets will eliminate idiosyncratic risk.
The principle of diversification tells us that:
beta coefficient.
The amount of systematic risk present in a particular risky asset, relative to the systematic risk present in an average risky asset, is called the particular asset's:
security market line
The linear relation between an asset's expected return and its beta coefficient defines the:
market risk premium
The slope of an asset's security market line is the:
a well-respected chairman of the Federal Reserve Bank suddenly resigns
Which one of the following is an example of a nondiversifiable risk?
total; systematic
Standard deviation measures _____ risk while beta measures ____ risk.
market value of the total shares held in each stock.
When computing the expected return on a portfolio of stocks the portfolio weights are based on the
is limited by the returns on the individual securities within the portfolio.
The expected return on a portfolio:
may be less than the variance of the least risky stock in the portfolio.
If a stock portfolio is well diversified, then the portfolio variance:
The standard deviation of a portfolio can often be lowered by changing the weights of the securities in the portfolio.
Which one of the following statements is correct concerning the standard deviation of a portfolio?
the Federal Reserve increases interest rates
Which one of the following is the best example of systematic risk?
beta of 1.0.
The systematic risk of the market is measured by a:
can be effectively eliminated through portfolio diversification.
Unsystematic risk:
an oil tanker runs aground and spills its cargo
Which one of the following is an example of unsystematic risk?
eliminate asset-specific risk.
The primary purpose of portfolio diversification is to:
a decrease in the portfolio standard deviation
Which one of the following would indicate a portfolio is being effectively diversified?
on
A security that is fairly priced will have a return _____ the security market line.
the risk-free rate of return.
The intercept point of the security market line is the rate of return which corresponds to:
yielded a higher return than expected for the level of risk assumed.
A stock with an actual return that lies above the security market line has:
minimum variance portfolio.
A dominant portfolio within an opportunity set that has the lowest possible level of risk is referred to as the:
systematic risk.
The measure of beta associates most closely with:
the dominant portion of the opportunity set.
An efficient set of portfolios is comprised of:
the risk-free rate.
A stock with a beta of zero would be expected to have a rate of return equal to:
move perfectly in sync with one another.
You have a portfolio comprised of two risky securities. This combination produces no diversification benefit. The lack of diversification benefits indicates the returns on the two securities:
+1 to -1.
The range of possible correlations between two securities is defined as:
move perfectly opposite to one another.
If the correlation between two stocks is -1, the returns on the stocks:
total; systematic
As we add more diverse securities to a portfolio, the ____ risk of the portfolio will decrease while the _____ risk will not.
The growth rate must be less than the discount rate.
Which one of these applies to the dividend growth model of stock valuation?
dividend yield.
Next year's annual dividend divided by the current stock price is called the:
capital gains
The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield.
four
In the formula, P3 = Div / R - g, the dividend is for period:
can be used to compute a stock price at any point in time.
The constant dividend growth model:
the present value of the future income that the stock is expected to generate.
The underlying assumption of the dividend growth model is that a stock is worth:
market values of all stocks to decrease.
Assume you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect the:
dividend yield plus the dividend growth rate.
The total return on a stock is equal to the:
risk, opportunities, accounting practices
A stock's PE ratio is primarily affected by which three factors?
future opportunities
Which one of these factors generally has the greatest impact on a firm's PE ratio?
price-sales ratio
Which one of these stock valuation methods is used for a non-dividend paying firm that is experiencing accounting losses?
was conducted in the primary market.
If the issuer of a stock receives the proceeds from a sale of that issuer's stock, then the sale:
Dealers buy at the bid price.
Which one of these statements is correct?
do not operate on the floor of a stock exchange.
Supplemental liquidity providers (SLPs):
guarantees the purchase price but not the order execution.
A limit order to buy:
cancelled at the end of the day if not executed.
A day order to sell at a limit of $32 will be
has a multiple market maker system.
NASDAQ