For purposes of maximum portfolio diversification, which of the following would provide the greatest diversification? A) Security A with a correlation coefficient of -0.0 B) Security B with a correlation coefficient of 0.0 C) Security C with a correlation coefficient of -0.50 D) Security D with a correlation coefficient of 0.50 ANSWER Answer: […]
Consider the data on expected returns and betas for a variety of assets in the table below. What is the expected return on shares of Bank of America using the SML? Asset Expected Return Beta Bank of America 0.9 Risk Free Asset 4% 0 Market Portfolio 10% 1 A) 5.4% B) 6.0% C) 8.2% D) […]
Which of the following is not a characteristic of an efficient market? A) Information is rapidly reflected in market prices. B) The market has a large number of buyers and sellers. C) Prices vary for a single asset or commodity as a result of differences in people’s willingness to pay. D) Prices reflect the intrinsic […]
The terms ________ and ________ mean the same thing. A) nondiversifiable risk; unsystematic risk B) diversifiable risk; systematic risk C) diversifiable risk; unsystematic risk D) total risk; unique risk ANSWER Answer: C
Two factors that go into the determination of the appropriate order point are the deliver-time stock and the safety stock required. Indicate whether the statement is true or false ANSWER TRUE
Altria Group Inc. (ticker: MO on NYSE) is an American manufacturer of tobacco products. Selected Financial information for Altria is provided in the table below. What is the expected return on shares of Altria using the SML? Asset Expected Return Beta Altria 0.5 Risk Free Asset 5% 0 Market Portfolio 10% 1 A) 5.0% B) […]
You wish to diversify your single-security portfolio in a way that will maximize your reduction in risk. Which of the following securities should you add to your portfolio? A) Treasury bills that have a correlation coefficient of 0.0 with your current security B) Alpha Company stock that has a correlation coefficient of -0.25 with your […]
Which of the following statements is FALSE? A) The maximum benefits to diversification between securities occur when they are perfectly positively correlated. B) The maximum benefits to diversification between securities occur when they are perfectly negatively correlated. C) There is some benefit to diversification when the correlation between securities is 0.0. D) There is some […]
Which of the following securities could NOT have any benefits for diversification with your investment portfolio? A) Treasury bills with a correlation coefficient of 0.0 with your portfolio B) Alpha Company stock that has a correlation coefficient of -0.25 with your portfolio C) Beta Company stock that has a correlation coefficient of 0.50 with your […]
The just-in-time inventory control system is just a new approach to the EOQ model which tries to produce the lowest average inventory possible. Indicate whether the statement is true or false ANSWER TRUE
