Section 5

List which of the following statement(s) concerning risk are correct? 1. Nondiversifiable risk is measured by beta. II. The risk premium increases as diversifiable risk increases. III. Systematic risk is another name for nondiversifiable risk. IV. Diversifiable risks are market risks you cannot avoid.

10. some true or false questions about the apt: a. the apt factors cannot reflect diversifiable risks. b. the market rate of return cannot be an apt factor. c. each apt factor must have a positive risk premium associated with it; otherwise the model is inconsistent. d. there is no theory that specifically identifies the apt factors. e. the apt model could be true but not very useful, for example, if the relevant factors change unpredictably

Question 4 a)  “When choosing the appropriate group of risk factors to include in a multifactor Arbitrage Pricing Theory (APT) model, we must allow for both unsystematic and systematic sources of risk.” Comment on this statement, in no more than 100 words.

Is the statement that a pproject that is unacceptable today might be acceptable tommorrow given a change in market returns correct?

What assumption about risk-adjusted techniques for measuring performance poses a potential problem? A. Portfolio risk is constant overtime B. Returns are normally distributed  C. Mean reversion D. None of the options are correct E. Lognormal outcome of prices

Which of the following statements regarding unsystematic risk is accurate?   Multiple Choice   It is measured by beta. It is compensated for by the risk premium. It can be effectively eliminated by portfolio diversification. It is measured by standard deviation. It is related to the overall economy.

What assumption about risk-adjusted techniques for measuring performance poses a potential problem? A. Portfolio risk is constant over time B. Returns are normally distributed C. Mean reversion   D. None of the options are correct.

Q7. In a market that is efficient, investors are only compensated for bearing Group of answer choices 1. diversifiable risk 2. unique risk 3. total risk 4. non-diversifiable risk

23

Which of the following is true according to the pure expectations theory? Forward rates:a. Exclusively represent expected future short rates.b. Are biased estimates of market expectations.c. Always overestimate future short rates.

Questions 31 through 36 are related. 31. If a change in the investment environment leads to an increase in the Risk-Free Rate while the Return on the Market Portfolio remains constant, the Market Risk Premium [Rm - Rf] would be expected to: a. Increase. b. Decrease. c. Remain Unchanged. d. Cannot be determined. e. None of the above answers is correct.

Market risk ________.   a. is equal to the rate of return generated by a risk-free asset b. cannot be eliminated, as it is non-diversifiable c. is synonymous with diversifiable risk d. is synonymous with financial risk

2 i.Discuss the importance of using benchmarks in evaluating portfolio performance                              ii. Explain the concept of risk tolerance and how it differs from risk appetite                      iii. Describe the difference between inherent risk and residual risk in investing                                                      iv. Explain how the APT differs from the CAPM in terms of underlying assumptions and factors considered          v. Explain the role of diversification in CAPM

At a minimum, which of the following would you need to know to estimate the amount of additional reward you will receive for purchasing a risky asset instead of a risk-free asset? 1. I. Asset's standard deviation 2. II. Asset's beta 3. III. Risk-free rate of return 4. IV. Market risk premium I, III, and IV only I, II, III, and IV I and III only II and IV only III and IV only ооо O

please quickly 11 The following is a correct statement concerning risk premium: A.The lower the average rate of return, the greater the risk premium B.The risk premium is not affected by the volatility of returns. C.The lower the volatility of returns, the greater the risk premium. D.The greater the volatility of returns, the greater the risk premium. E.The risk premium is not correlated to the average rate of return.

37 - An increase in investor risk aversion would be expected to:   Increase the Risk-Free Rate while Decreasing the Expected Return on the Market Portfolio. Increase the Risk-Free Rate while Increasing the Expected Return on the Market Portfolio. Decrease the Risk-Free Rate while Decreasing the Expected Return on the Market Portfolio. Decrease the Risk-Free Rate while Increasing the Expected Return on the Market Portfolio. There is not enough information to determine how the Risk-Free Rate and Expected Return on the Market Portfolio will change. None of the above answers is correct.

Unsystematic risk: is compensated for by the risk premium. is measured by standard deviation. is related to the overall economy. can be effectively eliminated by portfolio diversification. is measured by beta.