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Question No: 10 ( Marks: 1 ) - Please choose one

Which of the following is simply the weighted average of the possible returns, with the weights being the probabilities of occurrence?

► A probability distribution

► The expected return

► The standard deviation

► Coefficient of variation

Question No: 11 ( Marks: 1 ) - Please choose one

The square of the standard deviation is known as the ________.

► Beta

► Expected return

► Coefficient of variation

► Variance

Question No: 12 ( Marks: 1 ) - Please choose one

Why companies invest in projects with negative NPV?

► Because there is hidden value in each project

► Because they have chance of rapid growth

► Because they have invested a lot

► All of the given options

Question No: 13 ( Marks: 1 ) - Please choose one

An investor was expecting a 18% return on his portfolio with beta of 1.25 before the market risk premium increased from 8% to 10%. Based on this change, what return will now be expected on the portfolio?

► 22.5%

► 20.0%

► 20.5%

► 26.0%

Question No: 14 ( Marks: 1 ) - Please choose one

Which of the following is the characteristic of a well diversified portfolio?

► Its market risk is negligible

► Its unsystematic risk is negligible

► Its systematic risk is negligible

► All of the given options

Question No: 15 ( Marks: 1 ) - Please choose one

How the beta of a stock can be calculated?

► By monitoring price of the stock

► By monitoring rate of return of the stock

► By comparing the changes in the stock market price to the changes in the stock market index

► All of the given options

Question No: 16 ( Marks: 1 ) - Please choose one

Which of the following formula relates beta of the stock to the standard deviation?

► Covariance of stock with market * variance of the market

► Covariance of stock with market / variance of the market

► Variance of the market / Covariance of stock with market

► Slope of the regression line

Question No: 17 ( Marks: 1 ) - Please choose one

A beta greater than 1 for a stock shows:

► Stock is relatively more risky than the market

► If the market moves up by 10% the stock will move up by 12%

► As the market moves the stock will move in the same direction

► All of the given options

Question No: 18 ( Marks: 1 ) - Please choose one

If stock is a part of totally diversified portfolio then its company risk must be equal to:

► 0

► 0.5

► 1

► -1

Question No: 19 ( Marks: 1 ) - Please choose one

If risk and return combination of any stock is above the SML, what does it mean?

► It is offering lower rate of return as compared to the efficient stock

► It is offering higher rate of return as compared to the efficient stock

► Its rate of return is zero as compared to the efficient stock

► It is offering rate of return equal to the efficient stock

Question No: 20 ( Marks: 1 ) - Please choose one

An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit.

► Positive

► Negative

► Zero

► All of the given options

Regards

Vuhelps

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