Investments 11th Edition By Zvi Bodie -Test Bank

Investments 11th Edition By Zvi Bodie -Test Bank

Chapter 09 Test Bank – Static
Student: ___________________________________________________________________________

Multiple Choice Questions

1. In the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is

A. unique risk.
B. beta.
C. standard deviation of returns.
D. variance of returns.

2. In the context of the Capital Asset Pricing Model (CAPM), the relevant risk is

A. unique risk.
B. systematic risk.
C. standard deviation of returns.
D. variance of returns.

3. In the context of the Capital Asset Pricing Model (CAPM), the relevant risk is

A. unique risk.
B. market risk.
C. standard deviation of returns.
D. variance of returns.

4. According to the Capital Asset Pricing Model (CAPM), a well diversified portfolio’s rate of return is a function of

A. market risk.
B. unsystematic risk.
C. unique risk.
D. reinvestment risk.
E. None of the options are correct.

5. According to the Capital Asset Pricing Model (CAPM), a well diversified portfolio’s rate of return is a function of

A. beta risk.
B. unsystematic risk.
C. unique risk.
D. reinvestment risk.
E. None of the options are correct.

6. According to the Capital Asset Pricing Model (CAPM), a well diversified portfolio’s rate of return is a function of

A. systematic risk.
B. unsystematic risk.
C. unique risk.
D. reinvestment risk.

7. The market portfolio has a beta of

A. 0.
B. 1.
C. –1.
D. 0.5.
8. The risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively. According to the capital
asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal to

A. 0.06.
B. 0.144.
C. 0.12.
D. 0.132.
E. 0.18.

9. The risk-free rate and the expected market rate of return are 0.056 and 0.125, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on a security with a beta of 1.25 is equal to

A. 0.142.
B. 0.144.
C. 0.153.
D. 0.134.
E. 0.117.

10. Which statement is not true regarding the market portfolio?

A. It includes all publicly-traded financial assets.
B. It lies on the efficient frontier.
C. All securities in the market portfolio are held in proportion to their market values.
D. It is the tangency point between the capital market line and the indifference curve.
E. All of the options are true.