"Which one of the following is a correct definition of an Ibbotson and Sinquefield investment category as used to report historical returns in your textbook? (Points: 3),U.S. Treasury bills: 1-year debt securities issued by the U.S. Department of the Treasury ,Small-company stocks: Stocks of the smallest 20 percent of the firms listed on the NYSE ,Large-company stocks: Stocks of the largest 10 percent of the firms listed on the NYSE ,Long-term U.S. government bonds: Bonds issued by the U.S. government with a 30-year maturity ,,,2. (TCO 8) Based on the efficient market hypothesis, all “informed” investors will earn: (Points: 3),excess profits over the long-term. ,excess profits but only on short-term investments. ,a return equal to the value they paid for an investment. ,a return that cannot be accurately predicted because investments are subject to the random movements of the markets. ,,,3. (TCO 8) Which of the following statements is true regarding systematic risk? Select all that apply: (Points: 4),is diversifiable ,is the total risk associated with surprise events,,it is not project or firm specific ,is measured by beta,,,,4. (TCO 8) Assume a project that has the following returns for years 1 to 5: 15%, 4%, -13%, 34%, and 17%. What is the approximate expected return of this investment? (Points: 3),11% ,17% ,16.60% ,10% ,,,5. (TCO 8) Assume you are considering investing in two stocks, A & B. Stock A has an expected return of 16% and Stock B has an expected return of 9.5%. Your goal is to create a two-security portfolio that will have an expected return of 12%. If you have $250,000 to invest today, approximately how much would you invest in Stock B? (Points: 3),$96,000 ,$150,000 ,$175,000 ,,More than $200,000,,,,,6. (TCO 8) For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: ,,The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. What is the beta and standard deviation of Stock I? (Points: 3),1.2 and 24% ,0.6 and 12% ,1.2 and 12.5% ,Cannot be determined with the information given ,,,7. (TCO 8) For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: ,,The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. Which statement is true? Select all that apply: (Points: 4),Stock II has more risk than Stock I ,Stock II has less systematic risk than Stock I ,Stock I has a lower risk premium than Stock II ,Stock I has a lower expected return than Stock II ,,,8. (TCO 8) Which statements are false regarding risk? Select all that apply: (Points: 4),The expected return is always the same as the actual return ,A key to assessing risk is determining how much risk an investment adds to a portfolio ,Risks can always be diversified ,The higher the risk, the higher the return investors require for the investment ,,,9. (TCO 8) Are all risks diversifiable? Why or why not?" ,
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