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portfolio risk
systematic risk
unsystematic risk
total risk
2. A statistical measure of the degree to which two variables (e.g., securities' returns) move
together.
coefficient of variation
variance
covariance
certainty equivalent
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3.
5/8/2018 Chapter 5 Multiple-Choice Quiz
equal to zero.
equal to one.
4. A line that describes the relationship between an individual security's returns and returns on the
market portfolio.
characteristic line
beta
5. According to the capital-asset pricing model (CAPM), a security's expected (required) return is
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6.
5/8/2018 Chapter 5 Multiple-Choice Quiz
The risk-free security has a beta equal to , while the market portfolio's beta is
equal to .
zero; one.
7. Carrie has a "certainty equivalent" to a risky gamble's expected value that is less than the
risk aversion.
risk preference.
risk indifference.
a characteristic line.
the CAPM.
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9.
5/8/2018 Chapter 5 Multiple-Choice Quiz
standard deviation
coefficient of variation
correlation coefficient
beta
11. Plaid Pants, Inc. common stock has a beta of 0.90, while Acme Dynamite Company common
stock has a beta of 1.80. The expected return on the market is 10 percent, and the risk-free rate is 6
percent. According to the capital-asset pricing model (CAPM) and making use of the information
above, the required return on Plaid Pants' common stock should be , and the required return on
Acme's common stock should be .
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12.
5/8/2018 Chapter 5 Multiple-Choice Quiz
Espinosa Coffee & Trading, Inc.'s common stock measured beta is calculated to be 0.75. The
market beta is, of course, 1.00 and the beta of the industry of which the company is a part is 1.10. If
Merrill Lych were to calculate an "adjusted beta" for Espinosa's common stock, that adjusted beta
would most likely be .
equal to 1.10
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