1. The risk premium is defined as 50 percent in corporate bonds.

the rate of return on: If he wants to increase the

potential annual return on this
a risky asset minus the risk-free
portfolio, you could:
rate.                         
increase the standard deviation of
the portfolio
2. Potential of financial loss
Risk
7. The wider the distribution of an
investment's returns over time,
the _____ the expected average
3. Types of risks associated with
rate of return and the ______
investment decisions that the
the expected volatility of those
firm is unable to make timely
returns.
principal payments & interest
Credit Risk            higher; higher

4. The Capital Asset Pricing

8. Marekei Co. has risk-free rate
Model
return of 4.6, a beta of 0.96 and
Considers the undiversifiable risk
the expected return on the
of a stock as compared to that of
market is 13.5 percent. What is
the overall market.
the r?

13.14 percent
5. Philippine Peso Treasury bill
rate of return earned is referred
to as the:
9. The following are Porter's
Risk-free rate Forces, except:
bargaining power of the sellers

6. Joshtin Reformo has a

10. Financial managers are
portfolio that is invested 50%
concerned with which of the
in large-company stocks and
 following aspects of future
cash flows?
timing, risk, and size
 
11. All else constant, which one of
the following will decrease a
firm's cost of equity if the firm
computes that cost using the
security market line approach?
Assume the firm currently pays
an annual dividend of $1 a
share and has a beta of 1.2.
an increase in the firm's beta
12. Which one of the following
statements is an example of
unsystematic risk?
The number of vehicles sold by a
major manufacturer was less than
anticipated.
13. The risk-free rate is:
the rate of return on a riskless
investment
14. Where long-term capital funds
in debt and equity are
transacted
Capital Market
15. Which one of the following
statements is correct?
The higher the beta, the higher
the expected return on a security.
16. The following are the
factors/impacts on Financial
Market. except:
Profitability
17. The standard deviation is a
measure of:
Volatility
18. When we refer to the rate of
return on an investment, we
are generally referring to the:
total percentage return.
19. Which one of the following
statements is correct?
Beta measures the amount of
diversifiable risk in the overall
market versus the amount of
diversifiable risk in the stock.
20. Which one of the following is
considered the best method of
comparing the returns on
various-sized investments?
 percentage return

21. Which of the following is the

primary objective of a firm?
maximize stockholder wealth

22. The goal of financial

management is to maximize
the current:

value of the existing stock.

23. The earnings in additional

return for considering the risk
is called the:
risk premium

24. Which one of the following

statements is correct?
Large-company stocks are less
historically riskier than small-
company stocks.
25. Noncontrollable risk is also
known as _____ risk.
systematic