Select the event that would be included in the expected return on Nestle stock?

1. The chief financial officer of Nestle unexpectedly resigned.
2. The labor union representing Nestle's employees unexpectedly called a strike.
3. This morning, Nestle confirmed that its CEO is retiring at the end of the year as was anticipated.
4. The price of Nestle stock suddenly declined in value because researchers accidentally discovered that one of the firm's products can be toxic to household pets.
5. The board of directors made an unprecedented decision to give sizeable bonuses to the firm's internal auditors for their efforts in uncovering wasteful spending.

A stock has a beta of 1.18 and an expected return of 16 percent. A risk-free asset currently earns 5 percent. The beta of a portfolio comprised of these two assets is .8. What percentage of the portfolio is invested in the stock?

1. 65 percent
2. 68 percent
3. 74 percent
4. 71 percent
5. 62 percent

Which of the following statements concerning risk are correct? I. Non-diversifiable risk is measured by standard deviation. II. The risk premium increases as diversifiable risk increases. III. Systematic risk is another name for non-diversifiable risk. IV. Diversifiable risks are market risks you cannot avoid.

1. I and III only
2. II and IV only
3. I and II only
4. III
5. I, II, and III only