Risk and Return in Finance

Question 1

True or false: Unsystematic risk can be eliminated.

Accepted Answer

True

Question 2

What does diversification help reduce?

Accepted Answer

Specific risk

Question 3

True or false: Diversification eliminates all risks.

Accepted Answer

False

Question 4

What does expected value represent?

Accepted Answer

A probability-weighted average

Question 5

What does expected value represent?

Accepted Answer

Probability-weighted average

Question 6

True or false: Expected values ignore risk.

Accepted Answer

True

Question 7

True or false: APT states what systematic factors are.

Accepted Answer

False

Question 8

What is the main focus of investors according to CAPM?

Accepted Answer

Systematic risk only

Question 9

What is a key advantage of CAPM?

Accepted Answer

Links risk to return

Question 10

True or false: A higher Beta means more risk.

Accepted Answer

True

Question 11

Which model adds size as a risk factor?

Accepted Answer

Fama and French

Question 12

True or false: Expected values ignore risk.

Accepted Answer

True

Question 13

Which is a limitation of expected values?

Accepted Answer

May not match outcomes

Question 14

True or false: CAPM uses historical figures.

Accepted Answer

True

Question 15

True or false: Investors can borrow at risk-free rates.

Accepted Answer

True

Question 16

Which factor does APT consider?

Accepted Answer

Multiple systematic factors

Question 17

What does the bond yield plus approach add?

Accepted Answer

Fixed premium

Question 18

What is systematic risk?

Accepted Answer

Risk that can't diversify

Question 19

What does Beta measure?

Accepted Answer

Systematic risk exposure

Question 20

True or false: CAPM considers only market risk.

Accepted Answer

True

Questions 20