Q6. Systematic risk is defined as:

a. a risk that specifically affects an asset or small group of assets.

b. any risk that affects a large number of assets.

c. any risk that has a huge impact on the return of a security.

d. the random component of return.

e. None of the above.

Q7. In terms of the decision of what to do with extra cash, the firm's managers should undertake projects only if:

A) the firm never pays a dividend.

B) the expected return on the project is greater than that of an asset of similar risk.

C) the expected return on the project is less than that of an asset of similar risk.

D) the expected return on the project is equal to that of an asset of similar risk.

E) none of the above.

Q8. As we add more securities to a portfolio, the ____ will decrease: a. total risk b. systematic risk c. unsystematic risk d. standard error

Q9. Which of the following are examples of undiversifiable risk?

1. The COVID-19 pandemic
2. Inflation risk
3. Changes in interest rates
4. CEOs aversion to working on Fridays
5. a, b, and c
6. a and d

Q10. Money that the firm has already spent or is committed to spend regardless of whether a project is taken is called a(n): a. sunk cost. b. opportunity cost. c. erosion. d. fixed cost.