The difference between the expected rate of return on a given risky asset and the expected rate of return on a less risky asset is known as the _____.

a.risk adjusted return

b.risk premium

c.actual rate of return

d.standard deviation of returns

e.variance of returns

The expected rate of return of an investment _____.

a.is the mode value of the probability distribution of possible returns

b.equals the required rate of return for the investment

c.is the median value of the probability distribution of possible returns

d.is the mean value of the probability distribution of possible returns

e.equals one of the possible rates of return for that investment

The greater the variability of the possible returns on an investment, _____.

a.the lower the beta of the investment

b.the higher the actual return on the investment

c.the lower the standard deviation of the investment

d.the riskier the investmente.the lesser the expected return

Which of the following statements is correct about the risk-reward relationship of various types of risks?

a.Firm-specific risk is rewarded with additional returns.

b.Systematic risk is rewarded with additional returns.

c.Diversifiable risk is rewarded with additional returns.

d.Default risk is rewarded with additional returns.

e.Unsystematic risk is rewarded with additional returns.

The type of security that generates a return that is closest to a risk-free rate of return is a _____.

a.corporate bond

b.corporate stock

c.commercial paper

d.treasury bill

e.treasury note