# Week 5 : Risk and Return - Homework ES

Homework ES
 1. (TCO 8) The historical returns on large-company stocks, as reported by Ibbotson and Sinquefield, are based on: (Points : 3)

 2. (TCO 8) Based on the efficient market hypothesis, all “informed” investors will earn: (Points : 3)

 3. (TCO 8) Which of the following statements is true regarding systematic risk? Select all that apply: (Points : 4)

 4. (TCO 8) Assume a project that has the following returns for years 1 to 5: 15%, 4%, -13%, 34%, and 17%. What is the approximate expected return of this investment? (Points : 3)

 5. (TCO 8) Assume you are considering investing in two stocks, A & B. Stock A has an expected return of 16% and Stock B has an expected return of 9.5%. Your goal is to create a two-security portfolio that will have an expected return of 12%. If you have \$250,000 to invest today, which of the following statements is true? (Points : 3)

 6. (TCO 8) For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. What is the standard deviation of Stock I and II respectively? (Points : 3)

 7. (TCO 8) For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. Which statement is true? Select all that apply: (Points : 4)

 8. (TCO 8) Which statements are true regarding risk? Select all that apply: (Points : 4)

 9. (TCO 8) Are all risks diversifiable? Why or why not? (Points : 3)

 Subject Mathematics Due By (Pacific Time) 08/11/2013 08:00 pm
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