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| Which of the following statements regarding unsystematic risk is accurate? |
| Multiple Choice |
| It is measured by beta. |
| It is compensated for by the risk premium. |
| It can be effectively eliminated by portfolio diversification. |
| It is measured by standard deviation. |
| It is related to the overall economy. |
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- Unsystematic risk: is compensated for by the risk premium. is measured by standard deviation. is related to the overall economy. can be effectively eliminated by portfolio diversification. is measured by beta.Beta is which of the following: A) standard deviation. B) total risk. C) Beta is the relationship which is between an investment's return, and the market return. D) unsystematic risk.In the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is A. standard deviation of returns. B. beta. C. variance of returns. D. unique risk.
- Which of the following measures reflects the excess return earned on a portfolio per unit of its systematic risk a. Treynor’s measure b. Sharpe’s measure c. Jensen’s measure d. Total measure1. Define the components of holding period return. Can any of these components be negative? 2. How do you understand an investment risk and what statistic tools can be used to measure it?It is a risk adjusted performance measure that represents the average return on a portfolio. a. sharpe ratio b. Treynor index
- The security market line depicts: a. Expected return as a function of systematic risk (indicated by beta) b. The market portfolio as the optimal portfolio of risky assets c. The relationship between a security’s return and the return on the index d. Portfolio combinations of the market portfolio and the risk-free asset e. Expected return as a function of volatilityThe risk associated with the overall market is referred to as _____ risk. a. unsystematic b. diversified c. portfolio d. systematicWhich of the following is a false statement of the market price of risk found in the Capital Market Line? a) The incremental risk divided by the incremental expected return. b) Indicates the additional expected return that the market demands for an increase in a portfolios risk. c) The equilibrium price of risk in the capital market. d) The slope of the capital market line.
- What does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of systematic risk b. The abnormal return of an asset, defined as the degree to which its actual return exceeds that predicted by the capital asset pricing model c. The degree to which diversifiable risk is eliminated d. How much reward an investor is getting for each unit of risk assumedWhich of the following statements are true about systematic risk? Select one or more: a. Beta is a measure of systematic risk in ALL asset pricing models b. Systematic risk can be fully eliminated by diversification С. Systematic risk can be traded among financial entities but cannot be destroyed or eliminated d. All stocks must have the same exposure/factor loading on systematic risk e. Systematic risk is priced f. The premia on systematic risk must always be higher than the risk-free rate Which statements are true of optimization? Select one or more: a. It is a general mathematical tool and can be used not only in portfolio optimization but many business problems b. When applied in real world setting we often use computers to estimate the optimum numerically rather than doing calculus by hand с. One of the earliest applications of optimization to business problems is Augustin Cournot's 1838 duopoly pricing model d. Optimization can only ever be as effective as the description of the…What is a risk measure? a Alpha b Required return on the market portfolio c Standard deviation of historical returns