Quiz Ch 11 – Risk Premium and its Underlying Risk Type
Essentials of Corporate Finance
Ross, Westerfield, and Jordan
10th Edition
Which type of risk is the basis for the risk premium of an individual security?
Which type of risk is the basis for the risk premium of an individual security?
Which formula calculates the risk premium for individual security based on the expected return, risk-free rate, beta, and expected market return?
What does the security market line illustrate in terms of its relationship between two variables?
What does the slope of the security market line represent?
Which two variables form the basis for plotting the security market line, a linear function?
According to the systematic risk principle, what factor determines the expected return on a risky asset?
What does portfolio diversification eliminate?
What is a necessary outcome of diversifying a portfolio across various sectors and industries?
What is the implication for the reward-to-risk ratio of a portfolio consisting of correctly priced diverse securities?