Financial Management - Study Mode

[#196] Case in which average investors risk aversion is greater than slope of line and risk premium respectively is
Correct Answer

(A) steeper, greater

Explanation

Solution: Case in which average investors risk aversion is greater than slope of line and risk premium respectively is steeper, greater. Risk aversion means that investors will tend to purchase safe assets like highly rated bonds and CDs. Risk-averse individuals seek capital preservation over growth, which may actually be detrimental for those who are younger.

[#197] Expected returns weighted average on assets in portfolio is considered as
Correct Answer

(B) expected return on portfolio

Explanation

Solution: Expected returns weighted average on assets in portfolio is considered as expected return on portfolio. The expected return for an investment portfolio is the weighted average of the expected return of each of its components.

[#198] Correct measure of risk of stock is called
Correct Answer

(B) beta

Explanation

Solution: Correct measure of risk of stock is called beta. The beta of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors.

[#199] Standard deviation is 18% and coefficient of variation is 1.5% an expected rate of return will be
Correct Answer

(C) 19.50%

Explanation

Solution: Expected rate of return = Standard deviation + Coefficient of variation = 18% + 1.5% = 19.50%.

[#200] A proposal is not a Capital Budgeting proposal if it:
Correct Answer

(C) brings short-term benefits only