Question $1$:$-$ The risk premium for common stocks

a$)$ cannot be zero, for investors would be unwilling to invest in common stocks.

b$)$ is negative, as common stocks are risky.

c$)$ cannot be zero, for investors would be unwilling to invest in common stocks and must always be positive, in theory.

d$)$ cannot be zero, for investors would be unwilling to invest in common stocks and is negative, as common

stocks are risky.

Question $2$:$-$ In the mean$-$standard deviation graph an indifference curve has a $\_\_\_\_\_\_\_\_$ slope.

a$)$ negative

b$)$ zero

c$)$ positive

d$)$ vertical

Question $3$:$-$ X is a risk$-$averse investor. Y is a less risk$-$averse investor than X$.$ Therefore,

a$)$ for the same return, Y tolerates higher risk than X$.$

b$)$ for the same risk, X requires a lower rate of return than Y$.$

c$)$ for the same return, X tolerates higher risk than Y$.$

d$)$ for the same risk, Y requires a higher rate of return than X$.$

Question $4$:$-$ A firm in the early stages of the industry life cycle will likely have

a$)$ high risk.

b$)$ rapid growth.

c$)$ high market penetration and rapid growth.

d$)$ high risk and rapid growth.

Question $5$:$-$ If you believe in the $\_\_\_\_\_\_\_\_\_$ form of the EMH, you believe that stock prices reflect all available information, including information that is available only to insiders.

a$)$ semistrong

b$)$ strong

c$)$ weak

d$)$ None of the options

Question $6$:$-$ The riskiness of individual assets

a$)$ should be considered for the asset in isolation.

b$)$ should be considered in the context of the effect on overall portfolio volatility.

c$)$ should be combined with the riskiness of other individual assets in the proportions these assets constitute the entire portfolio.

d$)$ should be considered in the context of the effect on overall portfolio volatility and should be combined with the riskiness of other individual assets in the proportions these assets constitute the entire portfolio.

Question $7$:$-$ Suppose the risk$-$free return is $4\%.$ The beta of a managed portfolio is $1\mathrm{.}2,$ the alpha is $1\%,$ and the average return is $14\%.$ Based on Jensen$`$s measure of portfolio performance, you would calculate the return on the market portfolio as

a$)11\mathrm{.}5\%.$

b$)14\%.$

c$)15\%.$

d$)16\%.$