1) There is lower risk inherent in a portfolio if there is a high correlation between the stocks in a portfolio

1) There is lower risk inherent in a portfolio if there is a high correlation between the stocks in a portfolio.

2. How can recession, inflation, and high interest rates be characterized?
3. A firm that issues new bonds normally sets the coupon rate equal to the required rate on bonds of equal risk.
4. The largest annual supply of external funds for business corporations comes from issuance of which one of the following sources?
5. A stock with a beta that equals -1.0 has no market risk.
6. Callable bonds can be redeemed after but not prior to maturity by the firm.
7. By adding more stock to a portfolio, a stock’s diversifiable risk (i.e., its beta) can be lowered.
8. Which of the following occurrences would increase the chances that a firm calls its outstanding callable bonds?
9. For portfolio analysis purposes, ex post returns and standard deviations are commonly used even though a primary interest is in the ex ante data.
10. If a manager wants to increase the expected rate of return, he or she should increase the firm’s risk in relation to the market.
11. A company wants to issue new 20-year callable bonds that will be made callable after 5 years at a 5% call premium. How would this affect their required rate of return?
12. You only have four stocks in your portfolio. What will happen to your portfolio if you add some randomly selected stocks to it?
13. If a coupon bond sells at par, its current yield is equal its yield to maturity.
14. Which of the following statements would be true for a portfolio of 50 randomly selected stocks?
15. The callable bond will be called if rates fall far enough below the coupon rate, but it will not be called otherwise.
16. Bonds rated higher than BB+ by Standard & Poors and Fitch are considered to be investment grade issues.
17. A 10-year Treasury bond has a 12% annual coupon, the 15-year T-bond has an annual 8% coupon, the yield curve is flat, and all treasury securities have a 10% yield to maturity. Which of the following statements would be accurate?
18. According to the Capital Asset Pricing Model, the relevant risk of a stock is that stock’s contribution of risk to the risk of a well-diversified portfolio.
19. If Stock Z has a beta of 0.8, and Stock W has a beta of 1.6, which would be a correct statement?
20. Since floating-rate debt shifts interest rate risk to firms, it would be disadvantageous to issuers.
21. If a 10-year bond with a 9% annual coupon has a yield to maturity rate of 8%, which statement would be accurate?
22. Zero coupon bonds pay no interest and are offered at par value. These types of bonds allow investors to reap compensation through capital appreciation.