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CHAPTER 2
RISK AND RETURN: Part I
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject
lines.
Multiple Choice: True/False
(2.2) Standard deviation F N Answer: b EASY

1. The tighter the probability distribution of its expected future
returns, the greater the risk of a given investment as measured by its
standard deviation.
a. True
b. False
(2.2) Coefficient of variation F N Answer: a EASY
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.
Page 20 2: Risk and Return: Part I

Chapter True/False Chapter 2: Risk and Return:
Page
Part20I
2. The coefficient of variation, calculated as the standard deviation of
expected returns divided by the expected return, is a standardized
measure of the risk per unit of expected return.
a. True
b. False
(2.2) CV vs. SD F N Answer: b EASY

3. The standard deviation is a better measure of risk than the coefficient
of variation if the expected returns of the securities being compared
differ significantly.
a. True
b. False
(2.2) Risk aversion F N Answer: a EASY

4. Risk-averse investors require higher rates of return on investments
whose returns are highly uncertain, and most investors are risk averse.
a. True
b. False
(2.3) Portfolio risk F N Answer: a EASY

5. When adding a randomly chosen new stock to an existing portfolio, the
higher (or more positive) the degree of correlation between the new
stock and stocks already in the portfolio, the less the additional
stock will reduce the portfolio's risk.
a. True
b. False

6. Diversification will normally reduce the riskiness of a portfolio of
stocks.
a. True
b. False

7. In portfolio analysis, we often use ex post (historical) returns and
standard deviations, despite the fact that we are really interested in
ex ante (future) data.

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Part21I
a. True
b. False

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Part22I
(2. F N
(2.3) Portfolio return F N Answer: b EASY

8. The realized return on a stock portfolio is the weighted average of the
expected returns on the stocks in the portfolio.
a. True
b. False
(2.3) Market risk F N Answer: a EASY

9. Market risk refers to the tendency of a stock to move with the general
stock market. A stock with above-average market risk will tend to be
more volatile than an average stock, and its beta will be greater than
1.0.
a. True
b. False
(2.3) Market risk F N Answer: b EASY

10. An individual stock's diversifiable risk, which is measured by its
beta, can be lowered by adding more stocks to the portfolio in which
the stock is held.
a. True
b. False
3) Risk and expected returns Answer: b EASY

11. Managers should under no conditions take actions that increase their
firm's risk relative to the market, regardless of how much those
actions would increase the firm's expected rate of return.
a. True
b. False
(2.3) CAPM and risk F N Answer: a EASY

12. One key conclusion of the Capital Asset Pricing Model is that the value
of an asset should be measured by considering both the risk and the
expected return of the asset, assuming that the asset is held in a
well-diversified portfolio. The risk of the asset held in isolation is
not relevant under the CAPM.
a. True
b. False
(2.3) CAPM and risk F N Answer: a EASY
13. According to the Capital Asset Pricing Model, investors are primarily
concerned with portfolio risk, not the risks of individual stocks held

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Part23I
in isolation. Thus, the relevant risk of a stock is the stock's
contribution to the riskiness of a well-diversified portfolio.
a. True
b. False
(2.5) SML and risk aversion F N Answer: b EASY

14. If investors become less averse to risk, the slope of the Security
Market Line (SML) will increase.
a. True
b. False
(2.2) Variance F N Answer: a MEDIUM

15. Variance is a measure of the variability of returns, and since it
involves squaring the deviation of each actual return from the expected
return, it is always larger than its square root, its standard
deviation.
a. True
b. False
(2.2) Coefficient of variation F N Answer: a MEDIUM

16. Because of differences in the expected returns on different
investments, the standard deviation is not always an adequate measure
of risk. However, the coefficient of variation adjusts for differences
in expected returns and thus allows investors to make better
comparisons of investments' stand-alone risk.
a. True
b. False
(2.2) Risk aversion F N Answer: a MEDIUM

17. "Risk aversion" implies that investors require higher expected returns
on riskier than on less risky securities.
a. True
b. False
(2.2) Risk aversion F N Answer: a MEDIUM

18. If investors are risk averse and hold only one stock, we can conclude
that the required rate of return on a stock whose standard deviation is
0.21 will be greater than the required return on a stock whose standard
deviation is 0.10. However, if stocks are held in portfolios, it is
possible that the required return could be higher on the stock with the
low standard deviation.

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Part24I
(2. F N
a. True
b. False
(2.2) Risk prem. and risk aversion F N Answer: a MEDIUM

19. Someone who is risk averse has a general dislike for risk and a
preference for certainty. If risk aversion exists in the market, then
investors in general are willing to accept somewhat lower returns on
less risky securities. Different investors have different degrees of
risk aversion, and the end result is that investors with greater risk
aversion tend to hold securities with lower risk (and therefore a lower
expected return) than investors who have more tolerance for risk.
a. True
b. False
(2.3) Beta coefficient F N Answer: b MEDIUM

20. A stock's beta measures its diversifiable risk relative to the
diversifiable risks of other firms.
a. True
b. False

21. A stock's beta is more relevant as a measure of risk to an investor who
holds only one stock than to an investor who holds a well-diversified
portfolio.
a. True
b. False

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Part25I
(2. F N MEDIUM
3) Beta coefficient Answer: a
22. If the returns of two firms are negatively correlated, then one of them
must have a negative beta.
a. True
b. False

23. A stock with a beta equal to -1.0 has zero systematic (or market) risk.
a. True
b. False
(2.3) Beta coefficient F N Answer: a MEDIUM

24. It is possible for a firm to have a positive beta, even if the
correlation between its returns and those of another firm is negative.
a. True
b. False
(2.3) Portfolio risk F N Answer: a MEDIUM

25. Portfolio A has but one security, while Portfolio B has 100 securities.
Because of diversification effects, we would expect Portfolio B to have
the lower risk. However, it is possible for Portfolio A to be less
risky.
a. True
b. False
(2.3) Portfolio risk F N Answer: b MEDIUM

26. Portfolio A has but one stock, while Portfolio B consists of all stocks
that trade in the market, each held in proportion to its market value.
Because of its diversification, Portfolio B will by definition be
riskless.
a. True
b. False
(2.3) Portfolio risk F N Answer: b MEDIUM

27. A portfolio's risk is measured by the weighted average of the standard
deviations of the securities in the portfolio. It is this aspect of
portfolios that allows investors to combine stocks and thus reduce the
riskiness of their portfolios.

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Part26I
(2. F N MEDIUM
a. True
b. False
3) Portfolio risk and return Answer: b

28. The distributions of rates of return for Companies AA and BB are given
below:
State of the Probability of
Economy This State Occurring AA BB

Boom 0.2 30% -10%
Normal 0.6 10% 5%
Recession 0.2 -5% 50%
We can conclude from the above information that any rational, riskaverse
investor would be better off adding Security AA to a welldiversified
portfolio over Security BB.
a. True
b. False
(2.3) Cor. coefficient and risk F N Answer: b MEDIUM

29. Even if the correlation between the returns on two securities is +1.0,
if the securities are combined in the correct proportions, the
resulting 2-asset portfolio will have less risk than either security
held alone.
a. True
b. False
(2.3) Company-specific risk F N Answer: a MEDIUM

30. Bad managerial judgments or unforeseen negative events that happen to a
firm are defined as "company-specific," or "unsystematic," events, and
their effects on investment risk can in theory be diversified away.
a. True
b. False
(2.3) Portfolio beta F N Answer: b MEDIUM

31. We would generally find that the beta of a single security is more
stable over time than the beta of a diversified portfolio.
a. True
b. False

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Part27I
(2. F N MEDIUM
(2.3) Portfolio beta F N Answer: b MEDIUM
32. We would almost always find that the beta of a diversified portfolio is
less stable over time than the beta of a single security.
a. True
b. False
3) Diversification effects Answer: b

33. If an investor buys enough stocks, he or she can, through
diversification, eliminate all of the market risk inherent in owning
stocks, but as a general rule it will not be possible to eliminate all
diversifiable risk.
a. True
b. False
(2.3) CAPM F N Answer: b MEDIUM

34. The CAPM is built on historic conditions, although in most cases we use
expected future data in applying it. Because betas used in the CAPM
are calculated using expected future data, they are not subject to
changes in future volatility. This is one of the strengths of the
CAPM.
a. True
b. False
(2.5) Required return F N Answer: b MEDIUM

35. Under the CAPM, the required rate of return on a firm's common stock is
determined only by the firm's market risk. If its market risk is
known, and if that risk is expected to remain constant, then analysts
have all the information they need to calculate the firm's required
rate of return.
a. True
b. False
(2.5) Changes in beta F N Answer: a MEDIUM

36. A firm can change its beta through managerial decisions, including
capital budgeting and capital structure decisions.
a. True
b. False
(2.5) Changes in beta F N Answer: a MEDIUM

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Part28I
(2. F N MEDIUM
37. Any change in its beta is likely to affect the required rate of return
on a stock, which implies that a change in beta will likely have an
impact on the stock's price, other things held constant.
a. True
b. False
(2.5) SML F N Answer: b MEDIUM

38. The slope of the SML is determined by the value of beta.
a. True
b. False

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Part29I
F N MEDIUM
(2.5) SML Answer: a

39. The slope of the SML is determined by investors' aversion to risk. The
greater the average investor's risk aversion, the steeper the SML.
a. True
b. False
(2.5) SML F N Answer: a MEDIUM

40. If you plotted the returns of a company against those of the market and
found that the slope of your line was negative, the CAPM would indicate
that the required rate of return on the stock should be less than the
risk-free rate for a well-diversified investor, assuming that the
observed relationship is expected to continue in the future.
a. True
b. False

41. If you plotted the returns on a given stock against those of the
market, and if you found that the slope of the regression line was
negative, the CAPM would indicate that the required rate of return on
the stock should be greater than the risk-free rate for a
welldiversified investor, assuming that the observed relationship is
expected to continue into the future.
a. True
b. False
(2.5) SML F N Answer: a MEDIUM

42. The Y-axis intercept of the SML represents the required return of a
portfolio with a beta of zero, which is the risk-free rate.
a. True
b. False

43. The SML relates required returns to firms' systematic (or market) risk.
The slope and intercept of this line can be influenced by a manager's
actions.
a. True
b. False

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Part30I
44. The Y-axis intercept of the SML indicates the required return on an
individual asset whenever the realized return on an average (b = 1)
stock is zero.

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Part31I
(2. F N MEDIUM
a. True
b. False
5) CAPM and inflation Answer: a

45. If the price of money (e.g., interest rates and equity capital costs)
increases due to an increase in anticipated inflation, the risk-free
rate will also increase. If there is no change in investors' risk
aversion, then the market risk premium (rM − rRF) will remain constant.
Also, if there is no change in stocks' betas, then the required rate of
return on each stock as measured by the CAPM will increase by the same
amount as the increase in expected inflation.
a. True
b. False
(2.5) Market risk premium F N Answer: a MEDIUM

46. Since the market return represents the expected return on an average
stock, the market return reflects a certain amount of risk. As a
result, there exists a market risk premium, which is the amount over
and above the risk-free rate, that is required to compensate stock
investors for assuming an average amount of risk.
a. True
b. False
(2.3) Beta coefficient F N Answer: a HARD

47. Assume that two investors each hold a portfolio, and that portfolio is
their only asset. Investor A's portfolio has a beta of minus 2.0,
while Investor B's portfolio has a beta of plus 2.0. Assuming that the
unsystematic risks of the stocks in the two portfolios are the same,
then the two investors face the same amount of risk. However, the
holders of either portfolio could lower their risks, and by exactly the
same amount, by adding some "normal" stocks with beta = 1.0.
a. True
b. False
(2.3) CAPM F N Answer: b HARD

48. The CAPM is a multi-period model that takes account of differences in
securities' maturities, and it can be used to determine the required
rate of return for any given level of systematic risk.
a. True
b. False

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Part32I
Multiple Choice: Conceptual
(2.2) Risk aversion C N Answer: b MEDIUM

49. You are considering investing in one of the these three stocks:
Stock Standard Deviation Beta

A 20% 0.59
B 10% 0.61
C 12% 1.29
If you are a strict risk minimizer, you would choose Stock if it is
to be held in isolation and Stock if it is to be held as part of a

well-diversified portfolio.
a. A; B.
b. B; A.
c. C; A.
d. C; B.
e. A; A.
(2.2) Risk measures C N Answer: c MEDIUM

50. Which is the best measure of risk for a single asset held in isolation,
and which is the best measure for an asset held in a diversified
portfolio?
a. Standard deviation; correlation coefficient.

b. Beta; variance.
c. Coefficient of variation; beta.
d. Beta; beta.
e. Variance; correlation coefficient.
(2.2) Standard deviation C N Answer: b MEDIUM

51. Your friend is considering adding one additional stock to a 3-stock
portfolio, to form a 4-stock portfolio. She is highly risk averse and
has asked for your advice. The three stocks currently held all have b =
1.0, and they are perfectly positively correlated with the market.
Potential new Stocks A and B both have expected returns of 15%, are in
equilibrium, and are equally correlated with the market, with r = 0.75.
However, Stock A's standard deviation of returns is 12% versus 8% for
Stock B. Which stock should this investor add to his or her portfolio,
or does the choice not matter?
a. Stock A.
b. Stock B.
Chapter
Page 31 2: Risk and Return: Part I Conceptual
True/False
M/C Chapter 2: Risk and Return:
Page
Part31I
c. Neither A nor B, as neither has a return sufficient to compensate for
risk.
d. Add A, since its beta must be lower.
Chapter
Page 32 2: Risk and Return: Part I Conceptual
True/False
M/C Chapter 2: Risk and Return:
Page
Part32I
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recreation than could be got among the girls in St. Cecilia, what could that
be but momentary aberration or even a kind of temporary insanity? Is not a
wife better than a Sister? Oswald had no kind of doubt on the subject when
he saw his beautiful young wife at the head of his table, and reflected with
inward complacency upon the aspect she bore when first he saw her, though
at that time he had thought the poke-bonnet half-divine. But Agnes was not
so sure, had not such unhesitating convictions as her husband, and
wondered. This, perhaps, was the penalty she paid for her escapade.
Oswald’s light-heartedness was alien to her serious mood. He took his
existence so easily! and she knew that life was not so easy a matter, and
would take an occasional panic as the fair landscape glided past her, the
beautiful days and years flying away from her as fields and trees do on a
journey, when you seem yourself to be stationary, and it is the country about
that flies and travels on either side.
If she had known him longer, if she had known him better, would it have
made any difference? In all probability not the slightest, and she did not ask
herself that question; for, after all, Oswald was Oswald, and the only man in
the whole world——
As for the other personages mentioned in these pages, their affairs
worked themselves out as was to be expected, with no very extraordinary
results. Roger Burchell recovered of his wound because he could not help
it, not with any will of his; and went out to India in due time, where he did
very well and made steady progress, but neither then nor now became very
remarkable. He married too in the due course of events, when he could
afford it—as most men do, except perhaps in the very heart and centre of
society, a sect so small that it does not affect the world’s continuance, nor
need necessarily affect our peace of mind who look on. He forgot Cara and
the chapter in his life which was dominated by her, far more completely
than the romantic reader would believe possible, and was not at all sure
after he had been some years married whether it was not he who had
behaved badly to her; and, indeed, I think his wife had this impression, and
never having seen this object of his early affections, was rather pleased to
believe Cara a little flirt with whom her Roger had been involuntarily
‘entangled,’ but escaped in time. So stories are travestied and turned into
myths with piquant change of circumstance all over the world.
Mr. Maxwell had a more unlikely fate. Bursting out of No. 6 in the
Square, in the trouble of his mind, after that unlucky interference which had
come to less than nothing, but which must, he felt sure, cost him his friends,
he went with murderous energy through all his round of patients, and took it
out of them with unregulated zeal, making his hypochondriacs really ill by
way of variety, twisting the joints and cramping the sinews of the unhappy
people in his hands as cruelly as Prospero. This way of avenging himself
upon mankind, however, did not prevent him from suffering tortures in his
own person. Should he apologise—should he appeal to Cara to intercede for
him? Should he go humbly to the feet of the injured one, and ask to be
kicked and forgiven? He adopted another expedient more wonderful than
any of these. Next day was the day of his weekly visit to the Hill. Lovelier
lights and visions than those that revealed themselves through the openings
of the trees on that sweetest day of June could scarcely be. The sky was as
soft as a child’s eyes—the air as its breath. The trees hung rich and close
still in their early green, throwing their wealth of foliage all the more
closely together to hide that the flowers were over, the may faded, the
golden laburnum boughs all dropped to dust. Through the leafy arches came
glimpses of the great plain all billowy with trees, shadowing far into the
blue distance, and the great grey castle with its royal flag. Underneath on
the hedgerows there was one flush of the wild rose lighting up the winding
road as with a smile. To live on such a day was enough for pleasure. To
move through it easily without fatigue, with trees waving over you, and the
unfathomable blue shining, and the sun throwing magical gleams over the
landscape, hushed even the most restless soul to a semblance of goodness
and happiness. Unless you happen to be toiling along a dusty road, in the
blaze of the sunshine, in tight boots, or a dress too warm for the season,
which circumstances I allow to be contrary both to happiness and goodness,
I cannot understand how you could refuse to be good and happy on such a
day.
But everything promoted these exemplary sensations about the Hill.
Fatigue was not there, nor dust, nor undue heat. Old Miss Charity in her
sun-bonnet, and less old but still not young Miss Cherry in her cool and soft
grey gown, were on the lawn, surrounded by a world of roses—roses
everywhere in standards, in dwarfs, on trellis-work, over arches, along the
walls. The air was just touched by them to a delicate sweetness, to be
elevated into beatitude when you approached your face to a particular
flower. Mr. Maxwell arrived with his troubled soul, and the ladies made
much of him. They compassionated him for his hot drive. They offered him
tea; they gave him, on his refusal of the tea, claret cup with great bits of ice
tinkling in it, and making a grateful noise. They gave him a comfortable
chair on the lawn, where he had his doctors’ talk with old Miss Charity, and
felt her pulse and admired its steady beat, not one more or less than it ought
to be. ‘Please God, if I live long enough, I’ll pull you along to a hundred,’
he said, with professional enthusiasm. ‘But I shall not live long enough,’ he
added, in a despondent tone.
‘How old are you now?’ said Miss Charity. ‘Fifty? phoo, nonsense. I am
seventy-three. I want only seven-and-twenty of the hundred. You will be
just over my present age when we’ve accomplished it. And what a thing to
have lived for?’ The old lady was more ready for the joke than he was—he
shook his head.
‘You can’t think what foolish things I have been doing,’ he said; ‘never
man made a greater fool of himself.’
‘You have been asking someone to marry you, my poor man!’
‘No, by Jove! I never thought of that,’ he said, looking up quickly. Miss
Cherry had walked discreetly out of hearing, as she always did while they
had their medical talk. This was evidently a new idea to the doctor. ‘No,’ he
went on, ‘trying to keep other people from marrying, that was all.’
‘Still sillier; they will hate you for ever and ever,’ Miss Charity said, in
her ignorance, seated cool and smiling in her garden chair.
Meanwhile Miss Cherry strayed to one of the openings and looked
wistfully across the country. She wanted to hear about ‘the child.’ A
thousand questions were on her lips, but in her soft old-maidenly self-
consciousness she did not like to take the doctor aside in her turn, and there
were questions which she did not wish to ask in her aunt’s presence. It may
be imagined then what her surprise was when, startled by a voice at her
elbow, she turned round and found the doctor by her side. ‘The views are
lovely to-day,’ he said; but he was not thinking of the views, Miss Cherry
could see. Had he something painful to tell her—had anything gone wrong?
She began to ask a few faltering questions. ‘Tell me about Cara,’ she said. ‘I
am so hungering for news of the child.’ Miss Cherry looked up pathetically
in the doctor’s face with wistful anxiety in her soft eyes—everything about
her was soft, from her grey gown to her eyes. A mild consolatory woman,
not charming like Mrs. Meredith, not clever like other people he knew, but
a refreshment, like green lawns and green leaves and quietness to the heart.
The doctor turned round to see that nobody was looking. The old lady, who
had her suspicions of him, had gone in, and like a naughty old lady as she
was, had gone upstairs to a bedroom window, where she stood behind the
curtains, chuckling to herself, to watch the result. When Mr. Maxwell saw
the coast was clear and nobody looking (as he thought), he turned round
again to Miss Cherry, who stood anxiously waiting for the next word, and
deliberately, without a word of preface, fired as it were point blank into her
with a pistol at her heart—that is to say, he proposed. A greater shock never
was administered by any human being to another. Right off on the spot,
without wasting any words, he offered her himself and his brougham and
his practice and all that he had. The old lady at the window—naughty old
lady!—could make out the very moment when it was done, and saw
Cherry’s start and jump of amazement. ‘Will she have him?’ she asked
herself. ‘I could not put up with a man in my house.’ But it does not do to
take a gentle old maiden like Miss Cherry so suddenly. In the very
extremity of her surprise, she said no. How she trembled! ‘Oh no, I could
not, I could not, thank you, Mr. Maxwell! I am too old now. Long ago I
might have thought of such a thing; but I could not, I could not. It is not
possible. You must excuse me now.’
‘Oh, no one will force you, Miss Cherry, against your inclination,’ said
the doctor, angry and discomfited. And without waiting to say good-day to
his patient, he went off and threw himself into his brougham more
uncomfortable than before.
Whether Miss Cherry ever regretted this I cannot tell—perhaps if she
had not been so entirely taken by surprise—but ‘Oh no, oh no,’ she said to
herself, ‘I could not have done it. It would have been cheating Cara.’ But
what a shock it was on that June afternoon! As if the man had brought an
electric battery with him, Miss Charity said, who was the only one of the
three, however, to whom it was an amusement and no shock at all.
Such was the end of this middle-aged wooing, which was all over in a
quarter of an hour. The other of which we know, which had been going on
so long, and which only artificial motives made into a wooing at all, had
been broken off very abruptly by that interpellation of Dr. Maxwell’s and all
that followed. It was not till after the commotion caused by Oswald’s
return, and all the arrangements consequent upon his marriage, were over,
that the two friends returned to this broken chapter again. The changes
which had happened had not thrown them apart, however, and the
naturalness with which, even in the suspense of this question between
themselves, their intercourse went on, showed plainly either that warmer
relationships were unlikely or that they were the most natural things in the
world; but which? Each of them had been slightly piqued by the absence of
enthusiasm on the part of the other, but even that pique produced no
enthusiasm in themselves. They were exactly in the same state of feeling,
their minds only too much alike. But a return to the question was inevitable
one way or other, and Mr. Beresford took it in hand, not without a little
tremor, one still summer evening at the usual hour, when they were sitting
in their usual places, their windows open, but the lamps lighted, and the soft
dusk outside relieving with its shadowy background the soft illumination
within.
‘Do you remember,’ he said, ‘the talk we had one evening before all
these agitations began? It was not decided. You would not say yes, or no.’
‘Would I not say no? it was because it has too harsh a sound. Why
should there be yes’es or no’es between you and me?’
‘Ah, but it was needful. What do you say now? I can only repeat what I
said then. You know all my heart. Speak to me, dear. Shall it be yes or no?’
She had nothing to do with blushing at her age—yet she blushed and was
ashamed of it; but looked at him frankly, openly, all the same, holding out
her hands. ‘Dear,’ she said, ‘I will call you so too. No; why should we do
this and disturb our life and trouble our children with new ideas. Listen,
James Beresford. I would rather marry you than lose you; but there is no
thought of losing you in any case.’
‘None, my dear, none—none, whatever comes of it.’
‘Then why should we trouble each other with new ideas and disturb our
lives? We cannot be happier in our intercourse, you and I; we have all we
want in each other. Let the children marry; it is natural. What a blessing of
God it is that we have these dear proxies, James! And my boy is not going
away,’ she said, the tears coming to her eyes. ‘And I love your girl as if she
were my own—and we are the father and mother without any trouble. What
could heart wish for more?’
And no more was said. The subject was closed at once and for ever.
Such is the perversity of human nature, that when James Beresford went
home that evening he felt just a little cast down, disgusted, lonely, and
slighted as it were by fate. He had not really wished for the change; indeed,
did not really wish for it now; but yet—on the other side of the wall, Mrs.
Meredith was much more comfortable—for why? She had been permitted
the woman’s privilege of being the refuser, which banished all possibilities
of pique, and made it impossible for her to feel herself slighted. But by-and-
by they were both a great deal happier, and at their ease, which they had not
been for weeks before.
And do I need to tell how the natural conclusion which their father and
mother wisely and happily evaded arrived for Edward and Cara? Not quite
immediately, however, for the young man gathered his note-books together
again, and having given up India, entered upon his course of dinners, and
betook himself (like most other people) to the Bar. He was ‘called’ before
the marriage took place; and when the marriage did take place the young
people remained along with the old people in the two houses which were
one. It would be hard to make an absolute appropriation of what belongs to
No. 6 and what belongs to No. 8 in the Square. The thing which is most like
a fixture is Mrs. Meredith, who sits smiling in the same chair as the years
go on, hearing what everybody has to say. She is not expected to go to
anyone; but everyone comes to her; and her chair is the only absolutely
undisputed piece of property in the two houses. The young people are very
happy and go honeymooning as once their elders did; and sometimes Mr.
Beresford will make a journey in the interests of science or art. But nothing
has touched the double house, nor is likely to touch it, till death does those
sworn companions part.
Spottiswoode & Co., Printers, New-street Square, London.
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it. By Capt. F. W. von Herbert.
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OUR ENGLISH BIBLE. The Story of its Origin and Growth. By H. W.
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SIXTY YEARS IN THE WILDERNESS. Some Passages by the Way.
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A LONDONER’S LOG BOOK. By Rt. Hon. G. W. E. Russell.
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Nikkô. By Mrs. Bishop (Isabella L. Bird). With Illustrations.
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Typographical errors corrected by the etext transcriber:

beileved he would always=> believed he would always
{pg 78}
coming in brokes uddenly=> coming in broke suddenly
{pg 205}
herself treexmely disagreeable=> herself extremely
disagreeable {pg 223}
being scarely fashionable=> being scarcely fashionable
{pg 233}
It will send you=> I will send you {pg 249}
eager to her all about=> eager to hear all about {pg 269}
were like emblmes=> were like emblemes {pg 356}
ppinion for granted=> opinion for granted {pg 374}
believe that oerhaps=> believe that perhaps {pg 374}
still speechlsss=> still speechless {pg 398}
were bridgroom and bride=> were bridegroom and bride
{pg 402}
she said falteriug=> she said faltering {pg 404}
unkindly, or coldy=> unkindly, or coldly {pg 411}
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Test Bank for Intermediate Financial Management 11th

Edition Brigham Daves 1111530262 9781111530266

Test bank: https://testbankpack.com/p/test-bank-for-

Solution Manual: https://testbankpack.com/p/solution-manual-

(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)

Multiple Choice: True/False

(2.2) Standard deviation F N Answer: b EASY

(2.2) Coefficient of variation F N Answer: a EASY

Page 20 2: Risk and Return: Part I

(2.2) CV vs. SD F N Answer: b EASY

(2.2) Risk aversion F N Answer: a EASY

(2.3) Portfolio risk F N Answer: a EASY

(2.3) Portfolio risk F N Answer: a EASY

(2.3) Portfolio risk F N Answer: a EASY

Page 21 2: Risk and Return: Part I

Page 22 2: Risk and Return: Part I

(2.3) Portfolio return F N Answer: b EASY

(2.3) Market risk F N Answer: a EASY

(2.3) Market risk F N Answer: b EASY

3) Risk and expected returns Answer: b EASY

(2.3) CAPM and risk F N Answer: a EASY

Page 23 2: Risk and Return: Part I

(2.5) SML and risk aversion F N Answer: b EASY

(2.2) Variance F N Answer: a MEDIUM

(2.2) Coefficient of variation F N Answer: a MEDIUM

(2.2) Risk aversion F N Answer: a MEDIUM

(2.2) Risk aversion F N Answer: a MEDIUM

Page 24 2: Risk and Return: Part I

(2.2) Risk prem. and risk aversion F N Answer: a MEDIUM

(2.3) Beta coefficient F N Answer: b MEDIUM

(2.3) Beta coefficient F N Answer: b MEDIUM

Page 25 2: Risk and Return: Part I

(2.3) Beta coefficient F N Answer: b MEDIUM

(2.3) Beta coefficient F N Answer: a MEDIUM

(2.3) Portfolio risk F N Answer: a MEDIUM

(2.3) Portfolio risk F N Answer: b MEDIUM

(2.3) Portfolio risk F N Answer: b MEDIUM

Page 26 2: Risk and Return: Part I

3) Portfolio risk and return Answer: b

State of the Probability of

Economy This State Occurring AA BB

(2.3) Cor. coefficient and risk F N Answer: b MEDIUM

(2.3) Company-specific risk F N Answer: a MEDIUM

(2.3) Portfolio beta F N Answer: b MEDIUM

Page 27 2: Risk and Return: Part I

3) Diversification effects Answer: b

(2.3) CAPM F N Answer: b MEDIUM

(2.5) Required return F N Answer: b MEDIUM

(2.5) Changes in beta F N Answer: a MEDIUM

(2.5) Changes in beta F N Answer: a MEDIUM

Page 28 2: Risk and Return: Part I

(2.5) SML F N Answer: b MEDIUM

Page 29 2: Risk and Return: Part I

(2.5) SML Answer: a

(2.5) SML F N Answer: a MEDIUM

(2.5) SML F N Answer: b MEDIUM

(2.5) SML F N Answer: a MEDIUM

(2.5) SML F N Answer: b MEDIUM

(2.5) SML F N Answer: b MEDIUM

Page 30 2: Risk and Return: Part I

Page 31 2: Risk and Return: Part I

5) CAPM and inflation Answer: a

(2.5) Market risk premium F N Answer: a MEDIUM