15.10: Multiple Choice
- Page ID
- 94741
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1.
The total dollar return equals _______________.
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the EPS of a stock
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capital gains income plus dividend income
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the price paid for a share of stock minus the selling price of the stock
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the price paid for a share of stock divided by the selling price of the stock
2.
The dividend yield is calculated by _______________.
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dividing the price of the stock by the EPS
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subtracting any capital loss from the capital gain
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dividing the annual dividend by the initial stock price
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dividing the annual dividend by the net income for the year
3.
Which of the following is the best example of firm-specific risk?
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A global pandemic causes major disruptions in the economy.
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The Federal Reserve increases the money supply dramatically, leading to massive inflation.
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AAA Pharmaceuticals withdraws a medication as it studies whether strokes five people suffered after taking the medication were related to the medication.
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As an arctic blast descends on North America, most of the United States is blanketed in snow or ice.
4.
Investors diversify their portfolio in order to _______________.
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reduce risk
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increase risk
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increase return
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increase the standard deviation
5.
Which of the following would be the best example of systematic risk?
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An error in the company’s computer system miscalculates the amount of inventory that Monique’s Boutique is holding.
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BlueJay Air has a reduction in new reservations following a crash of one of its jets.
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The spokesperson for Serena’s Sports Shoes is involved in an ethical scandal.
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Interest rates rise after the Federal Reserve announces it will slow down the rate of growth of the money supply.
6.
As the number of stocks in a portfolio increases, _______________.
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firm-specific risk increases
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systematic risk becomes zero
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systematic risk decreases and returns increase
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firm-specific risk is reduced but systematic risk remains
7.
Beta is a measure of _______________.
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systematic risk
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firm-specific risk
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a firm’s profitability
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a stock’s dividend yield
8.
Which of the following would be the best estimate of the risk-free rate?
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The rate of inflation
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The average return on the S&P 500
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The average return on Amazon’s stock
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The average return on US Treasury bills
9.
The Sharpe ratio can be considered a measure of _______________.
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the reward of an investment in relation to the risk
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the systematic risk of a stock
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the total return of a stock investment
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the historical return of an individual security
10.
A positive Jensen’s alpha indicates that a portfolio has _______________.
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a negative beta
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an abnormal return
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more total risk than the average portfolio
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more systematic risk than the average portfolio
11.
If an equally weighted portfolio contains 10 stocks, then _______________.
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the stocks in the portfolio will each have a weight of 0.10
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the return of the portfolio must be multiplied by 10 to get the annualized return
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the standard deviation of the portfolio will be one-tenth the standard deviation of one of the stocks
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the standard deviation of the portfolio will be 10 times the standard deviation of one of the stocks