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MGT-325 Mod 4 Quiz 1)

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MGT-325 Mod 4 Quiz

1).Any action taken by a financial manager that increases risk will also increase the required return.

True

2.Combining two assets having perfectly negatively correlated returns will result in the creation of a portfolio with an overall risk that? ________

decreases to a level below that of either asset

3.Which of the following valuation methods is superior to others in the list since it considers expected? earnings?

?P/E multiple

4.Preferred stock is valued as if it were a? ________.

Perpetuity

5.Which of the following is true of par value of a common? stock?

It is an arbitrary value established for legal purposes in a? firm's corporate charter.

6.The portion of an? asset's risk that is attributable to firm−?specific, random causes is called? ________.

 

unsystematic risk

 

7.Which of the following is true of common? stocks?

The common stock of a corporation can be either privately or publicly owned.

 

8.A beta coefficient of 0 represents an asset that? ________.

 

is unrelated to the market portfolio

 

9.The total rate of return on an investment over a given period of time is calculated by? ________.

 

dividing the? asset's cash distributions during the? period, plus change in? value, by its beginning−of period investment value.

 

10.From a? corporation's point of? view, a disadvantage of issuing preferred stock is? ________

 

that the dividends are not tax−deductible

 

11.The purpose of adding an asset with a negative or low positive beta is to? ________

 

reduce risk

 

12.A? ________ is a measure of relative dispersion used in comparing the risk of assets with differing expected returns.

 

coefficient of variation

 

?

13.A(n) ________ portfolio maximizes return for a given level of? risk, or minimizes risk for a given level of return.

 

Efficient

 

14.Holders of equity capital? ________.

 

own the firm

 

15.According to the efficient market? hypothesis, prices of actively traded stocks? ________.

 

do not differ from their true values in an efficient market

 

16.Which of the following is a marketable? security?

 

Treasury bill

 

17.The? ________ describes the relationship between nondiversifiable risk and the required rate of return.

 

capital asset pricing model

 

18.The CAPM can be divided into? ________.

 

risk−free rate and risk premium