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Question [QUESTION] 1. Which of the following is a true statement?

Question [QUESTION] 1. Which of the following is a true statement?

Question

[QUESTION]

1. Which of the following is a true statement?

a. The risk and return that a firm experienced in the past is also the risk level for its future.

b. Firms can quite possibly change their stocks’ risk level by substantially changing their business.

c. If a firm takes on riskier new projects over time, the firm itself will become less risky.

d. If a firm takes on less risky new projects over time, the firm itself will become more risky.

[QUESTION]

2. This is the average of the possible returns weighted by the likelihood of those returns occurring.

a. efficient return

b. expected return

c. market return

d. required return

[QUESTION]

3. The set of probabilities for all possible occurrences.

a. probability

b. probability distribution

c. stock market bubble

d. market probabilities

[QUESTION]

4. This is typically considered the return on U.S. government bonds and bills and equals the real interest and the expected inflation premium.

a. required return

b. risk-free rate

c. risk premium

d. market risk premium

[QUESTION]

5. This is the reward investors require for taking risk.

a. required return

b. risk-free rate

c. risk premium

d. market risk premium

[QUESTION]

6. This is the reward for taking systematic stock market risk.

a. required return

b. risk-free rate

c. risk premium

d. market risk premium

[QUESTION]

7. This model includes an equation that relates a stock’s required return to an appropriate risk premium:

a. asset pricing

b. behavioral finance

c. beta

d. efficient markets

[QUESTION]

8. The asset pricing theory based on a beta, a measure of market risk.

a. Behavioral Asset Pricing Model

b. Capital Asset Pricing Model

c. Efficient Markets Asset Pricing Model

d. Efficient Market Hypothesis

[QUESTION]

9. In theory, this is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate.

a. efficient market

b. market portfolio

c. probability distribution

d. stock market bubble

[QUESTION]

10. The use of debt to increase an investment position.

a. behavioral finance

b. financial leverage

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