Investment Risk and Portfolio Management Paper 5


An analyst at ABC Securities is in the process of reviewing the following information on YoYo, Inc., a publicly traded toy manufacturer:
? Share price for the last 20 years
? 10-Q filings for the last 5 years
? 10-K filings for the last 15 years
? Website for YoYo, Inc.
The above collection of data is an example of which of the following?


The term “beta” can best be described as the


The CFO of Clean Waterworks, a publicly traded company, is expecting to pay a dividend next year of $1.25 and projecting that the price of the company’s stock will be $45 in 1 year. The CFO has determined that the required rate of return for Clean Waterworks is 10%. Based on the data available, what is the value of one share of Clean Waterworks stock today?


Risk factors that cannot be eliminated through diversification include which of the following?
I. Interest-rate fluctuations
II. General price-level changes
III. New product development
IV. Management turnover


Yerxa Industries is considering expanding its international operations. Which one of the following conditions should Yerxa’s controller classify as political risk?


In the context of the capital asset pricing model (CAPM), the beta coefficient of a stock that has the same systematic risk as the market as a whole is equal to


Systematic risk explains why


Stock A and Stock B are combined into an equally weighted portfolio. If Stock A has a standard deviation of return of 30%, Stock B has a standard deviation of return of 30%, and the portfolio of the two stocks has a standard deviation of return of 30%, what is the correlation coefficient of the returns between the two stocks?


A stock began the year with a stock price of $60 per share. In the middle of the year, it had a 3-for-2 stock split. The stock ended the year with a price of $50 per share. No dividends were paid. What total return did investors earn on the stock during this year? A. - B. C.


An analyst uses the capital asset pricing model (CAPM) to measure the required return on two stocks, X and Y. The expected market rate of return is 12%, the risk-free rate of return is 4%, the beta (?) coefficient of stock X is 0.5, and the beta (?) coefficient of stock Y is 2.0. The required returns of the two stocks are


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