11. The square of the standard deviation is known as the ________. A. Beta B. Expected...
11. The square of the standard deviation is known as the
________.
A. Beta
B. Expected return
C. Coefficient of variation.
D. Variance
12. Why companies invest in projects with negative NPV?
A. Because there is hidden value in each project
B. Because they have chance of rapid growth
C. Because they have invested a lot
D. All of the given options
13. An investor was expecting a 18% return on his portfolio with
beta of 1.25 before the market risk premium increased from 8% to
10%. Based on this change, what return will now be expected on the
portfolio?
A. 22.5%
B. 20.0%
C. 20.5%
D. 26.0%
14. Which of the following is the characteristic of a well
diversified portfolio?
A. Its market risk is negligible
B. Its unsystematic risk is negligible
C. Its systematic risk is negligible
D. All of the given options
Homework Answers
11. The answer is D. Variance
Square of standard deviation is known as variance
12.The answer is D. All of the other options
These are the reasons a company invests in a negative NPV project
13. Return on portfolio = risk free rate +beta*market risk premium
18% = risk free return + 1.25*8%
Hence, risk free return = 8%
Hence, return after increase in risk premium = 8%+1.25*10%
= 20.5%
I.e. c
14. The answer is b. Unsystematic risk is negligible since it can be diversified
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