FIN700: Financial Management - Macroeconomic Risk - Finance Assessment Answer

Finance Assessment Task

• The announcement effect of news is defined as: 

A. expected return + anticipated return.
B. anticipated return + actual total return.
C. expected part + surprise.
D. total return + surprise.

• Non-systematic risk is also known as:

A. market risk.
B. systematic risk.
C. macroeconomic risk.
D. unique risk

•  Complete the following sentence: In a well-diversified investment portfolio, ……. is negligible.

A. systematic risk
B. systemic risk
C. non-systematic risk
D. market risk

• _____________ is essentially eliminated by a well-diversified portfolio.

A. systematic risk
B. systemic risk
C. some of the non-systematic risk
D. most of the non-systematic risk

• Which of the following statements regarding beta is incorrect

A. Beta is a measure of systematic risk.
B. The beta for the market portfolio is 1.
C. Assets with a beta less than 1 are said to have lower systematic risk
D. Beta is primarily a measure of total risk.

• What are the missing words? In an efficient state, the ……. must be the same for all the assets in the market.

   A. systematic risk     

   B. reward-to-risk ratio

   C. variance of returns     

   D. unique risk.

• The difference between the expected return on a market portfolio and the risk-free rate is known as the:

1. market return.     B. risk-free premium.    C. market risk premium.   D. total return premium

• All things being equal, if the variance of the market increases,:

1. beta increases     B. beta decreases       C. beta remains the same    D. none of A, B or C.

• Complete the following sentence. The capital market line (CML) explains the expected return for:

1. all assets.        B. efficient portfolios.    C. all real assets.           D. something else.

• The most diversification in a two-asset investment portfolio is achieved if the two assets have a correlation co-efficient of:

1.               B. -1 (i.e., minus 1)       C. zero.                  D. 0.5. 
 

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