Market risk ________. a. is equal to the rate of return generated by a risk-free asset b. cannot be eliminated, as it is non-diversifiable c. is synonymous with diversifiable risk d. is synonymous with financial risk
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Market risk ________.
is equal to the
cannot be eliminated, as it is non-diversifiable
is synonymous with diversifiable risk
is synonymous with financial risk
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- The systematic risk principle states that the expected return on a risky asset depends only on which one of the following? Unsystematic risk Market risk Diversifiable riskWhat does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of systematic risk b. The abnormal return of an asset, defined as the degree to which its actual return exceeds that predicted by the capital asset pricing model c. The degree to which diversifiable risk is eliminated d. How much reward an investor is getting for each unit of risk assumedThe capital asset pricing model (CAPM) contends that there is systematic and unsystematic risk for an individual security. Which is the relevant risk variable and why is it relevant? Why is the other risk variable not relevant?
- . The Capital asset Pricing Model (CAPM) contends that there is systematic & unsystematic risk for an individual security. Which is the relevant risk variable & why it’s relevant?According to the CAPM, the main factor that explains the performance of an asset is given by the... Asset-specific idiosyncratic risk Systemic Risk of the asset, expressed through its BETA against the Broad Market Absolute Risk of the asset expressed by its Volatility (Standard Deviation of the Returns) None of the aboveSystematic risk is diversifiable, so it is an investment's relevant risk. Unsystematic risk is O True False
- Which of the following is NOT true? In risk-neutral valuation the risk-free rate is used to discount expected cash flows Options can be valued based on the assumption that investors are risk neutral Risk-neutral valuation provides prices that are only correct in a world where investors are risk-neutral In risk-neutral valuation the expected return on all investment assets is set equal to the risk-free rateWhich of the statements about the Arbitrage Pricing Theory MUST BE TRUE. I. There is only one systematic risk, the market risk. II. The market risk factor must be one of many systematic risk factors. III. Individual assets may have a positive or negative alpha A. I only B. II only C. III only D. None of the aboveSomeone who is risk neutral A. does not care about an asset's risk B. places a value on an asset equal to its expected expected value OC. is indifferent between a risk-free asset and a risky asset with the same expect value OD. all of the above OE. none of the above
- True or false: The CAPM states that expected returns depend on an asset’s loading on market risk. Thus, any asset with a standard deviation greater than the standard deviation of the market portfolio must have an expected return greater than the market portfolio, since it is riskier than the market. If this were not the case, no investor would be willing to hold the risky asset in their portfolio, so markets could not clear.According to Capital Asset Pricing theory (CAPM), in a competitive marketplace: Group of answer choices A. only systematic risk is rewarded. B. only diversifiable risk is rewarded. C. all types of risks are rewarded. D. no risk is rewarded.Beta is defined as the: a. Amount of systematic risk in a risky asset relative to that in an average asset. b. Ratio of unsystematic risk in a risky asset relative to the systematic risk in the overall market. c. Amount of systematic risk in a risky asset relative to that of a risk-free asset. d. Ratio of the total risk in a risky asset relative to the systematic risk in the overall market. e. Slope of the security market line.