Quiz 4

Question 1
2 out of 2 points

For a portfolio of 40 randomly selected stocks, which of the following is most likely to be true?
Answer

Selected Answer: The beta of the portfolio is equal to the average of the betas of the individual stocks.
Correct Answer: The beta of the portfolio is equal to the average of the betas of the individual stocks.

Question 2
2 out of 2 points

Which of the following statements is CORRECT?
Answer

Selected Answer: During a period when a company is undergoing a change such as increasing its use of leverage or taking on riskier projects, the calculated historical beta may be drastically different from the beta that will exist in the future.
Correct Answer: During a period when a company is undergoing a change such as increasing its use of leverage or taking on riskier projects, the calculated historical beta may be drastically different from the beta that will exist in the future.

Question 3
2 out of 2 points

Which of the following statements best describes what you should expect if you randomly select stocks and add them to your portfolio?
Answer

Selected Answer: Adding more such stocks will reduce the portfolio's unsystematic, or diversifiable, risk.
Correct Answer: Adding more such stocks will reduce the portfolio's unsystematic, or diversifiable, risk.

Question 4
2 out of 2 points

Inflation, recession, and high interest rates are economic events that are best characterized as being
Answer

Selected Answer: among the factors that are responsible for market risk.
Correct Answer: among the factors that are responsible for market risk.

Question 5
2 out of 2 points

Which of the following statements is CORRECT?
Answer

Selected Answer: The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. One could also construct a scatter diagram of returns on the stock versus those on the market,