A. How do systematic risk and unsystematic risk differ?

• Diversification has little to no impact on systematic risk, whereas it can have an impact on unsystematic risk.
• Unsystematic risk commands a risk premium, whereas systematic risk does not.
• Passive fund management is better for systematic risk, whereas active fund management is better for unsystematic risk.
• Systematic risk can be managed away, whereas unsystematic risk cannot.

B Between the capital asset pricing model (CAPM), discounted cash flow analysis and bond yield plus risk premium (BYPRP), which approach produces the least accurate estimates?

• The bond yield plus risk premium (BYPRP) approach
• The capital asset pricing model (CAPM)
• The discount cash flow analysis
• The three approaches are equally accurate

C. As the CEO of a publicly-traded company, Janson signs the company's federal income tax return.

By doing so, which federal regulation is he complying with?

• Securities Exchange Act of 1934
• Securities Act Amendments of 1975
• Securities Act of 1933
• Sarbanes-Oxley Act of 2002

D. A security that is plotted directly on the security market line is __________.

• overvalued for its expected return and level of risk
• fairly priced for its expected return and level of risk
• more attractive to a company raising capital than one plotted below the security market line
• more attractive to an investor than one plotted above the security market line