Question :
71.ShawndeterminesthatifLexallCorporationhashighrevenues,thenWatersCorporationwillhavelowrevenues,andthatifLexallCorporationhaslowrevenues,thenWatersCorporationwillhavehighrevenues.Shawnbuysstockinbothcorporations.
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71.ShawndeterminesthatifLexallCorporationhashighrevenues,thenWatersCorporationwillhavelowrevenues,andthatifLexallCorporationhaslowrevenues,thenWatersCorporationwillhavehighrevenues.Shawnbuysstockinbothcorporations.
a.Hehasreducedfirm-specificriskbutnotmarketrisk.
b.Hehasreducedmarketrisk,butnotfirm-specificrisk.
c.Hehadreducebothfirm-specificriskandmarketrisk.
d.Hehasreducedneitherfirm-specificrisknormarketrisk.
72.Amandatalkswithseveraldifferentbrokersatasocialgathering.ShehearsthefollowingadvicefrombrokersA,B,andC.Whichbroker,ifany,gaveherincorrectadvice?
a.BrokerA:“Therearerisksinholdingstocks,eveninahighlydiversifiedportfolio.”
b.BrokerB:“Portfolioswithsmallerstandarddeviationshavelowerrisk.”
c.BrokerC:“Stockswithgreaterrisksofferloweraveragereturns.”
d.Theyallgavehercorrectadvice.
73.Chloetalkedtoseveralstockbrokersandmadethefollowingconclusions.Which,ifany,ofChloe’sconclusionsare
a.Itisrelativelyeasytoreducefirm-specificriskbyincreasingthenumberofcompaniesoneholdsstockin.
b.Stockprices,evenifnotexactlyarandomwalk,areveryclosetoit.
c.Somepeoplehavemadealotofmoneyinthestockmarketbyusinginsiderinformation,butthesecasesarenotcontrarytotheefficientmarketshypothesis.
d.AllofChloe’sconclusionsarecorrect.
74.Otherthingsthesame,asthenumberofstocksinaportfoliorises,
a.riskincreasesandthestandarddeviationofthereturnrises.
b.riskincreasesandthestandarddeviationofthereturnfalls.
c.riskdecreasesandthestandarddeviationofthereturnrises.
d.riskdecreasesandthestandarddeviationofthereturnfalls.
75.Otherthingsthesame,asthestocksofagreaternumberofcorporationsareheldinaportfolio,
a.riskincreasesatanincreasingrate.
b.riskincreasesatadecreasingrate.
c.riskdecreasesatanincreasingrate.
d.riskdecreasesatadecreasingrate.
Figure27-6.Onthegraph,xrepresentsriskandyrepresentsreturn.
76.RefertoFigure27-6.PointArepresentsasituationinwhich
a.allofaperson’ssavingsareallocatedtoaclassofsafeassets.
b.thepersonknowswithcertaintythathisorherreturnwillbe3percent.
c.thestandarddeviationoftheperson’sportfolioiszero.
d.Alloftheabovearecorrect.
77.RefertoFigure27-6.Whichofthefollowingstatementsiscorrect?
a.AtpointAthestandarddeviationoftheportfoliois3.
b.AriskaversepersonalwayswillchoosetobeatpointA.
c.AtpointDtheportfolioconsistsofabout15percentstocksand85percentsafeassets.
d.Thefigureshowsthatthegreatertherisk,thegreaterthereturn.
78.Diversificationreduces
a.onlymarketrisk.
b.onlyfirm-specificrisk.
c.neithermarketorfirm-specificrisk.
d.bothmarketandfirm-specificrisk.
79.Whichofthefollowingisasourceofmarketrisk?
a.Holdingstocksinmanycompaniescarriestheriskofareducedaveragereturn.
b.RealGDPvariesovertimeandsalesandprofitsmovewithrealGDP.
c.Whenapaperproducerhasdecliningsales,itislikelythatsowillotherpaperproducers.
d.IfstockholdersbecomeaggravatedwiththewayaCEOrunsacompany,thepriceofthatcompany’sstock
80.Therearemanyconcernsforrisk-averselenders.Considerthefollowing:1.Lendersareconcernedthatborrowerswiththegreatestriskaretheonesmostlikelytoactivelypursueloans.2.LendersareconcernedthatrealGDPwilldeclineleadingtoreducedcorporateprofits.3.Lendersareconcernedthatproductsproducedbycertaincorporationswillbecomeobsolete.
a.1ismarketrisk;2isfirm-specificrisk
b.2ismarketrisk;3isfirm-specificrisk
c.3ismarketrisk;1isfirm-specificrisk
d.2isfirm-specificrisk;3ismarketrisk