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Homework answers / question archive / MGT-325 Mod 4 Quiz 1)

MGT-325 Mod 4 Quiz 1)


MGT-325 Mod 4 Quiz

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


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? ________.


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.




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

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