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    1. Which of these is a measure summarizing the overall past performance of an investment?
    Average return
    Dollar return
    Market return
    Percentage return
    2. Which of the following is the reward investors require for taking risk?
    Market risk premium
    Required return
    Risk-free rate
    Risk premium
    3. Which of the following is defined as the volatility of an investment which includes firm specific risk as well as market risk?
    Market risk
    Total risk
    Diversifiable risk
    Standard deviation
    4. Which of these is the set of probabilities for all possible occurrences?
    Market probabilities
    Probability distribution
    Probability
    Stock market bubble
    5. Which of these is the investor’s combination of securities that achieves the highest expected return for a given risk level?
    Efficient portfolio
    Total portfolio
    Optimal portfolio
    Modern portfolio
    6. To find the percentage return of an investment:
    divide the dollar return by the investment’s value at the beginning of the period.
    multiply the dollar return by the investment’s value at the beginning of the period.
    multiply the dollar return by the investment’s value at the end of the period.
    divide the dollar return by the investment’s value at the end of the period.
    7. Which of the following is an index that tracks 500 companies which allows for a great deal of diversification?
    Fortune 500
    Wall Street Journal
    Nasdaq
    S&P 500
    8. Which of these is the line on a graph of return and risk (standard deviation) from the risk-free rate through the market portfolio?
    Efficient market line
    Capital market line
    Efficient market hypothesis
    Capital asset pricing line
    9. Which of the following is a model that includes an equation that relates a stock’s required return to an appropriate risk premium?
    Efficient markets
    Beta
    Behavioral finance
    Asset pricing
    10. Which of the following is data that includes past stock prices and volume financial statements corporate news analyst opinions etc.?
    Generally accepted accounting principles
    Public information
    Privately held information
    Audited financial statements
    11. Which of the following are the stocks of small companies that are priced below $1 per share?
    Penny stocks
    Hedge fund stocks
    Bargain stocks
    Stock market bubble stocks
    12. TechNo stock was $25 per share at the end of last year. Since then it paid a $1.50 per share dividend last year. The stock price is currently $23. If you owned 300 shares of TechNo what was your percent return?
    6 percent
    -2 percent
    6.5 percent
    -8 percent
    13. Which of the following is another term for market risk?
    Modern portfolio risk
    Firm specific risk
    Total risk
    Nondiversifiable risk
    14. Investor enthusiasm causes an inflated bull market that drives prices too high ending in a dramatic collapse in prices is known as:
    privately held information.
    efficient market.
    behavior finance.
    stock market bubble.
    15. Which of the following is defined as the portion of total risk that is attributable to firm or industry factors and can be reduced through diversification?
    Modern portfolio risk
    Firm specific risk
    Market risk
    Total risk
    16. Which of the following is a true statement?
    If a firm takes on riskier new projects over time the firm itself will become less risky.
    Firms can quite possibly change their stocks’ risk level by substantially changing their business.
    The risk and return that a firm experienced in the past is also the risk level for its future.
    If a firm takes on less risky new projects over time the firm itself will become more risky.
    17. Which of these is similar to the Capital Market Line except that risk is characterized by beta instead of standard deviation?
    Security market line
    Probability market line
    Stock market line
    Market risk line
    18. Which of these includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment?
    Portfolio
    Average return
    Market return
    Dollar return
    19. In theory which of these is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate?
    Efficient market
    Market portfolio
    Stock market bubble
    Probability distribution
    20. We commonly measure the risk-return relationship using which of the following?
    Expected returns
    Correlation coefficient
    Coefficient of variation
    Standard deviation

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