[QUESTION]
1. Which of the following is a true statement?
a. The risk and return that a firm experienced in the past is also the risk level for its future.
b. Firms can quite possibly change their stocks risk level by substantially changing their business.
c. If a firm takes on riskier new projects over time, the firm itself will become less risky.
d. If a firm takes on less risky new projects over time, the firm itself will become more risky.
[QUESTION]
2. This is the average of the possible returns weighted by the likelihood of those returns occurring.
a. efficient return
b. expected return
c. market return
d. required return
[QUESTION]
3. The set of probabilities for all possible occurrences.
a. probability
b. probability distribution
c. stock market bubble
d. market probabilities
[QUESTION]
4. This is typically considered the return on U.S. government bonds and bills and equals the real interest and the expected inflation premium.
a. required return
b. risk-free rate
c. risk premium
d. market risk premium
[QUESTION]
5. This is the reward investors require for taking risk.
a. required return
b. risk-free rate
c. risk premium
d. market risk premium
[QUESTION]
6. This is the reward for taking systematic stock market risk.
a. required return
b. risk-free rate
c. risk premium
d. market risk premium
[QUESTION]
7. This model includes an equation that relates a stocks required return to an appropriate risk premium:
a. asset pricing
b. behavioral finance
c. beta
d. efficient markets
[QUESTION]
8. The asset pricing theory based on a beta, a measure of market risk.
a. Behavioral Asset Pricing Model
b. Capital Asset Pricing Model
c. Efficient Markets Asset Pricing Model
d. Efficient Market Hypothesis
[QUESTION]
9. In theory, this is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate.
a. efficient market
b. market portfolio
c. probability distribution
d. stock market bubble
[QUESTION]
10. The use of debt to increase an investment position.
a. behavioral finance
b. financial leverage
c. probability
d. stock market bubble