# Unit 5 math test

Term
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The variances of an investments returns is a measure of the:

A. Volatility of the rates of return.
B. Probability of a negative return.
C. Historic return over long period
D. Average value of the investment.
E none of the above
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Terms in this set (36)
Regarding diversification, _____________________________.

A. most of the benefits are realized with about 20 to 30 stocks
B. It is the process of increasing the riskiness associated.
C. The portfolio returns are reduced, and the standard deviation
D. There is no limit to the amount of risk that can be eliminated through the process.
E. None of the above
Which of the following is least effective in reducing the unsystematic risk of a portfolio?

A. Reducing the number of stocks held in a portfolio
B. Adding bonds to a stock portfolio.
D. Adding US Treasury bills to a risky portfolio
A stock investor owns a diversified portfolio of 15 stocks. What will be the likely effect in portfolio return standard deviation from adding one more stock?

A. A Slight increase will occur.
B. A large increase will occur.
C. A large decrease will occur.
D. A slight decrease will occur
E. None of the above
Which of the following statements related to risk is correct?

A. The beta portfolio must increase when a stock with a high return.......
B. Every portfolio that contains 25 or more securities is free of unsystematic risk.
C. Adding five additional stock to a deviation portfolio must lower the portfolio beta .
D. Portfolio beta can be effectively lowered by adding t-bills to the portfolio.
E. None of the above
The company cost of capital WACC may be an inappropriate discount rate for a capital budgeting proposal if:

A. It calculates a negative NPV
B. The proposal has a different degree of risk
C. The company had unique risk
D. The company expects to earn more than the risk-free rate.
E. WACC is an appropriate discount rate for all project of the firm