1.Given the following expected returns and risk, which security will be ranked number one.

SecuritiesStandard DeviationExpected Return

QVC15%18%

Apple30%40%

Google35%42%

AnnTaylor20%12%

A. QVC, because ithas the lowest risk

B.Google, because it has the highest return

C.Apple, because it has the lowest coefficient of variation

D.Ann Taylor, because it has the highest coefficient of variation

2.Tamikais considering a security with the following possible rates of return:

ProbabilityReturn(%)

0.209.60

0.3012.00

0.3014.40

0.2016.8

Calculate the expected rate of return and the standard deviation of the returns.

A.13.2%;6.05%

B.13.2%; 2.46%

C.7.92%; 6.05%

D.7.92%; 2.46%

E.None of the options specified here

3.The ________ the distribution of possible returns________ is the risk of an investment

A.wider; higher

B.wider; lower

C.narrower; higher

D.None of the above

4.Victoriahas concluded that next year the following relationships are possible:

Economic StatusProbabilityRate of Return

Weak Economy0.15-5%

Static Economy0.605%

Strong Economy0.2510%

Compute the Expected Return of the security

A.5%

B.20%

C.10%

D.6.25%

E.4.75%

5.On the basis of Question #4, compute the standard deviation of returns

A.0.6%

B.1.4%

C.4%

D.4.6%

E.None of the options specified here

6.The return for the market during the next period is expected to be 16 percent; the risk-free rate is 10 percent. Calculate the required rate of return forMegan Cavanaugh, Inc.with a beta of 1.5.

A.6%

B.16%

C.19%

D.24%

E.None of the options specified here

7.A stock with a beta greater than one has returns that are __________ volatile than the market and a stock with a beta of less than one exhibits returns which are ____________ volatile than those of the market portfolio.

A.more; more

B.less; less

C.Iess; more

D.more; less

E.None of the options specified here.

8.If we are able to fully diversify, what is the appropriate measure of risk to use?

A.Expected Return

B. Standadard Deviation

C.Coefficient of Variation

D.Beta

E. All of the options specified here

9.The capital asset pricing model:

A.provides a risk-return trade off in which risk is measured in terms of the standard deviation

B. provides a risk-return trade off in which risk is measured in terms of beta.

C. measures risk as the coefficient of variation between security and market

D. depicts the total risk of a security

E. None of the options specified here

10.If Stormy holds a portfolio made up of the following stocks:

Investment ValueBeta

Stock A$2,0001.5

Stock B$5,0001.2

Stock C$3,0000.8

What is the beta of the portfolio?

A. 1.17

B.1.14

C.1.32

D.Cann't be determined

E.None of the options specified here.

11.Which of the following has a beta of one?

A.risk-free asset

B.the market

C.All Common stocks

D.All corporate bonds

E.None of theoptions specified here

12.Winnder Liis considering investing in Ford Motor Company. Which of the followingare examples of diversifiable risk?

a. Risk resulting from possibility of a stock market crash.

b. Risk resulting from uncertainty regarding a possiblestrike against Ford.

c. Risk resulting from an expensive recall of a Ford product.

d. Risk resulting from interest rates decreasing.

A.a only

B.a and d only

C.b and c only

D.a, b, c, and d

E.None of theoptions specified here