Corporate Finance Exam Quality Questions And Answers Verified 100% Correct

Corporate Finance Exam Quality Questions And Answers Verified 100% Correct 1) Portfolio risk is typically measured by ________ while the risk of a single investment is measured by ________. A) standard deviation; beta B) security market line; standard deviation C) beta; standard deviation D) beta; slope of the characteristic line - ANSWER -c 2) Which of the following investments is clearly preferred to the others for an investor who is not holding a welldiversified portfolio? Investment σ A 18% 20% B 20% 20% C 20% 22% A) Investment A B) Investment B C) Investment C D) Cannot be determined without information regarding the risk-free rate of return. - ANSWER -b 3) Stock A has a beta of 1.2 and a standard deviation of returns of 18%. Stock B has a beta of 1.8 and a standard deviation of returns of 18%. If the market risk premium increases, then A) the required return on stock B will increase more than the required return on stock A. B) the required returns on stocks A and B will both increase by the same amount. C) the required returns on stocks A and B will remain the same. D) the required return on stock A will increase more than the required return on stock B. - ANSWER -a 4) Stock A has a beta of 1.2 and a standard deviation of returns of 14%. Stock B has a beta of 1.8 and a standard deviation of returns of 18%. If the risk-free rate of return increases and the market risk premium remains constant, then A) the required return on stock B will increase more than the required return on stock A. B) the required returns on stocks A and B will both increase by the same amount. C) the required returns on stocks A and B will not change. D) the required return on stock A will increase more than the required return on stock B. - ANSWER -b 5) Which of the following is the slope of the security market line? A) beta B) one C) it varies, and is steeper for riskier securities D) the market risk premium - ANSWER -d 1) Stock A has an expected return of 12% with a standard deviation of 8%. If returns are normally distributed, then approximately two-thirds of the time the return on stock A will be: A) between 12% and 20%. B) between 8% and 12%. C) between -4% and 28%. D) between 4% and 20%. - ANSWER -D 2) Investment A has an expected return of 15% per year, while investment B has an expected return of 12% per year. A rational investor will choose