Components of Risk & Portfolio Risk
Assess your understanding of systematic risk, unsystematic risk, portfolio return and portfolio risk. Below quiz is compiled with open source MCQs available as student resources and questions framed by us. The idea is to make online learning interesting and productive.
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No matter how large the number of stocks in the portfolio is, the risk that cannot be diversified away is the:
1 point
Unique risk
Systematic risk
Unsystematic risk
Companyspecific risk
Clear selection
An "aggressive" common stock would have a "beta"
1 point
Equal to zero.
Equal to one.
Less than one.
Greater than one.
Clear selection
A negative correlation coefficient indicates that two securities:
1 point
are independent of each other
move in the same direction
move in opposite directions
have zero covariance
Clear selection
If the book value is greater than market value comparison with the investors for future stock are considered as
1 point
Inexperienced
Optimistic
Pessimistic
Experienced
Clear selection
Which of the following is not a variable in the calculation of the variance of a portfolio?
1 point
The variance of each asset
The expected return of each asset
The proportion invested in each asset
The correlations between assets
Clear selection
The risk reduction of a twoasset portfolio is largest when the correlation between two assets is:
1 point
1
0.5
0
+1
Clear selection
Covariances between assets:
2 points
Can only be positive
Play an important role in determining a portfolio's expected return
Can only fluctuate between 1 and +1
Measure the degree of dependency between two assets
Clear selection
A line that describes the relationship between an individual security's returns and returns on the market portfolio.
2 points
Characteristic line
Security market line
Capital market line
Beta
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The benefits of diversification increase as the:
2 points
correlation between the returns of the securities in the portfolio increases
number of stocks in the portfolio decreases
correlation between the returns of the securities in the portfolio decreases
number of stocks in the same industry increases
Clear selection
The risk of a stock in a portfolio can be expressed using the ______________instead of the covariance.
1 point
Coefficient of variation
Standard deviation
Variance
Correlation coefficient
Clear selection
The market portfolio has a beta of:
1 point
1.0
0.0
1.0
0.5
Clear selection
The _______________ is a measure of the tendency of the returns to move together.
1 point
Variance
Standard deviation
Absolute deviation
Covariance
Clear selection
This type of risk is avoidable through proper diversification.
1 point
Portfolio risk
Systematic risk
Unsystematic risk
Total risk
Clear selection
In securities analysis, there should be a riskreturn trade off with higher risk assets having __________ expected returns than lowerrisk assets.
1 point
Higher
Lower
The same
None of the above
Clear selection
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