Regarding the risk-and-return discussion

Assignment Help Financial Management

Reference no: EM132053003

1. An asset’s risk (sensitivity) related to the overall economy and market movement is called its ________________

A) unsystematic risk.

B) nondiversifiable risk.

C) idiosyncratic risk.

D) total risk.

2. Regarding the risk-and-return discussion, find the incorrect statement below.

A) The nondiversifiable risk of an asset is measured by its beta coefficient (b).

B) An asset’s risk premium divided by its b is called the reward-to-risk ratio.

C) Market risk premium is the difference between the expected return on the market portfolio and the risk-free rate.

D) The Security Market Line (SML) shows the linear relation between an asset's expected return and its variance.

Reference no: EM132053003

Questions Cloud

Three products beyond the split-off point : What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?

What is asset beta : Asset A has an expected return of 11%, i.e., E(RA)=11%. The market premium is expected to be 8%. If the risk-free rate (Rf) is 5%, what is asset A's beta?

Assets likely has the lowest level of risk : Which of the following assets likely has the lowest level of risk (therefore the lowest expected return)?

Statements regarding the efficient market hypothesis : Which of the following statements regarding the efficient market hypothesis (EMH) is incorrect?

Regarding the risk-and-return discussion : Regarding the risk-and-return discussion, find the incorrect statement below.

What will be the taxes due on sale : Assume a property is purchased for $1,000,000 and sold at the end of five years for a price of $1,270,000. What will be the taxes due on sale?

Convexity exhibited by the mortgage-backed securities : Discuss the negative convexity exhibited by the mortgage-backed securities in the context of duration and pre-payment speed.

Average historical return on common stocks : estimate of the market risk premium is provided by the difference between the average historical return on common stocks and the risk-free interest rate.

Compute discounted payback period of the project : Compute the Discounted Payback Period of the project.

User Account

All Pages