Systematic risk

1.	is the tendency for a stock's return and the return on the market to move together
2.	is reduced by constructing a diversified portfolio
3.	depends on the firm's business and financial risk
4.	is measured by beta coefficients

	a.	2 and 4
	b.	1 and 2
	c.	1 and 4
	d.	2 and 3

Which of the following will reduce the required return on an investment?

	a.	a decrease in the Treasury bill rate and a decrease in beta
	b.	an increase in beta and a reduction in the Treasury bill rate
	c.	an increase in the Treasury bill rate and an increase in beta
	d.	an increase in the Treasury bill rate and a decrease in beta

An investor may reduce risk by selecting

	a.	stocks with poorly correlated returns
	b.	a cross-section of firms in the same industry
	c.	stocks traded on organized exchanges
	d.	high beta stocks

If a bond is selling for a premium, that implies

1.	interest rates have risen
2.	interest rates have fallen
3.	the yield to maturity exceeds the current yield
4.	the yield to maturity is less than the current yield

	a.	1 and 3
	b.	2 and 4
	c.	1 and 4
	d.	2 and 3