(Download PDF) Business Finance 11th Edition Peirson Test Bank Full Chapter

Business Finance 11th Edition Peirson
Test Bank
Go to download the full and correct content document:
https://testbankfan.com/product/business-finance-11th-edition-peirson-test-bank/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...
Personal Finance 11th Edition Garman Test Bank
https://testbankfan.com/product/personal-finance-11th-edition-
garman-test-bank/
Corporate Finance 11th Edition Ross Test Bank
https://testbankfan.com/product/corporate-finance-11th-edition-
ross-test-bank/
Personal Finance 11th Edition Kapoor Test Bank
https://testbankfan.com/product/personal-finance-11th-edition-
kapoor-test-bank/
Principles of Corporate Finance 11th Edition Brealey

Test Bank
https://testbankfan.com/product/principles-of-corporate-
finance-11th-edition-brealey-test-bank/
Fundamentals of Corporate Finance 11th Edition Ross
Test Bank
https://testbankfan.com/product/fundamentals-of-corporate-
finance-11th-edition-ross-test-bank/
Multinational Business Finance 15th Edition Eiteman

Test Bank
https://testbankfan.com/product/multinational-business-
finance-15th-edition-eiteman-test-bank/
Multinational Business Finance 12th Edition Stonehill

Test Bank
finance-12th-edition-stonehill-test-bank/

Test Bank

Test Bank
Chapter 07 Testbank
Student: ___________________________________________________________________________
1. Which distribution is a list of the possible dollar returns from the investment together with the probability of each
return?
A. Normal distribution.
B. Probability distribution.
C. Both Normal distribution and Probability distribution.
D. utility function.
2. Variance is best defined as:
A. difference of opinion in expected returns.

B. the mean of the squared deviations from the expected value.
C. the median difference between the most probable outcome and least probable outcome.
D. the difference between the expected return and the actual return.
3. Which distribution can be fully described by its expected value and standard deviation?
D. None of the given options.
4. Which investor attaches decreasing utility to each increment in wealth?
A. A risk-seeking investor.
B. A risk-neutral investor.
C. A risk-averse investor.
D. All of the given options.
5. Which investor attaches equal utility to each increment in wealth?
B. A risk-averse investor.
C. A well diversified investor.
D. A risk-neutral investor.
6. An investor's preferences regarding expected return and risk can be illustrated using:
A. yield curves.
B. a normal distribution.
C. indifference curves.
D. an efficient portfolio.
7. Which investor has a positive attitude towards expected return and a negative attitude towards risk?
A. A risk-averse investor.
C. A risk-seeking investor.
D. A well-diversified investor.
8. Portfolio theory was initially developed by:
A. Fama (1970).
B. Markowitz (1952).
C. Modigliani and Miller (1958).
D. Sharpe (1950).
9. Assume two securities A and B. The correlation coefficient between these two securities can be written as:
A.
B.
C.
D.
10. Which type of risk is unique to a firm and may be eliminated by diversification?
A. Macro risk.
B. Unsystematic risk.
C. Systematic risk.
D. Total risk.
11. Which statement best describes the market portfolio?
A. Portfolio of all traded assets in the universe.

B. Portfolio of all assets weighted according to their market capitalisation.
C. Portfolio of all risky assets weighted according to their value.
D. Portfolio of all risky assets weighted according to their market capitalisation.
12. The capital market line:
A. describes the equilibrium risk-return relationship for efficient portfolios.

B. describes the equilibrium risk-return relationship for all portfolios.
C. describes the equilibrium risk-return relationship for riskless portfolios.
D. describes the equilibrium risk-return relationship for risky portfolios.
13. A security market line:
A. explains the co-variance between the returns on the risky asset and the market portfolio.
B. explains the co-variance between the returns on the risky asset and a riskless asset.
C. is a graphical representation of the CAPM.
D. is a graphical representation of the CML.
14. Examine the following probability distribution:
The expected value from this is:
A. $3500
B. $4000
C. $3000
D. $2500
The range and standard deviation of the distribution are:
A. $4000 and $1095.45, respectively.

B. $1095.45 and $4000, respectively.
C. $5000 and $1095.45, respectively.
D. $4000 and $2000, respectively.
The mean, range and standard deviation are:
A. 0.06, 0.10 and 0.0693, respectively.

B. 0.06, 0.08 and 0.0693, respectively.
C. 0.06, 0.08 and 0.022, respectively.
D. 0.07, 0.10 and 0.022, respectively.
17. It is often assumed that an investment's distribution of returns follows a normal distribution because:
A. investment distributions are not usually bell shaped.

B. the expected value is the weighted average expected return from an investment.
C. the expected value gives a measurement of risk.
D. it enables an investment to be described by its expected value and standard deviation.
18. What would be the shape of the probability distribution for completely certain returns?
A. A vertical line.
B. Bell shaped but with a high peak.
C. A horizontal line.
D. Two or more vertical lines.
19. What would be the shape of the probability distribution for completely uncertain returns?
A. Horizontal line above the x axis.

B. Vertical line.
C. Horizontal line along the x axis.
D. Bell-shaped but very flat.
20. Which statement best describes the attitude of investors towards risk?
A. Investors may behave as though they are risk seekers for small investments.
B. Investors behave as though they are risk averse for investments of significant size.
C. For a risk-averse investor, the standard deviation of the return distribution is a relevant measure of risk.
D. All of the given answers.
21. The benefit of diversification to an investor is the reduction of:
A. brokerage costs.
B. brokerage costs and risk.
C. risk.
D. research time.
22. Which of the following statements is true?
A. Two assets that are perfectly negatively correlated can produce a portfolio with zero variance.
B. Adding an asset to a portfolio by random selection will reduce the risk of a portfolio.
C. Adding a riskless security to a portfolio will increase its overall risk.
D. The amount of risk reduction that can be achieved by adding a new security to an existing portfolio increases as
the correlation between the expected returns of the new security and the expected returns on the existing portfolio
increases.
23. Which of the following investments does a rational investor prefer?
A. Investment A: E(R) = 10%, = 3%

B. Investment B: E(R) = 10%, = 5%
C. Investment C: E(R) = 11%, = 3%
D. None of the given options, as a rational investor would require more information from which to make a decision.
24. Suppose that the returns on an investment are normally distributed with an expected return of 8% and standard
deviation of 4%. What is the likelihood of making a negative return? (Hint: the area under a curve for 1 std dev is
34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%).
A. 47.73%
B. 34.13%
C. 15.87%
D. 2.27%
deviation of 5%. What is the likelihood of making a positive return? (Hint: the area under a curve for 1 std dev is
34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%.)
A. 84.13%
B. 2.27%
C. 97.73%
D. 15.87%
deviation of 3%. What is the likelihood of receiving a return that is equal to or less than 19%? (Hint: the area under a
curve for 1 std dev is 34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%.)
A. 97.73%
B. 84.13%
C. 15.87%
D. 2.27%
27. Suppose you have the choice between two investments – one that pays fixed interest of 4% p.a., and another whose
returns are normally distributed with an expected return of 10% and standard deviation of 3%. What is the likelihood
of receiving a return on the second investment that is equal to or greater than that which can be received from the
first investment? (Hint: the area under a curve for 1 std dev is 34.13%, 2 std dev is 47.73% and 3 std dev is
49.87%.)
A. 97.73%
B. 84.13%
C. 65.87%
D. 52.27%
28. A risk-averse investor attaches:
A. increasing utility to each increment in wealth.

B. decreasing utility to each increment in wealth.
C. increasing utility to each increment in risk.
D. no utility to each increment in risk.
29. A risk-neutral investor attaches:

C. decreasing utility to each increment in risk.
D. equal utility to each increment in wealth.
30. A risk-seeking investor attaches:

B. increasing utility to each decrement in risk.
D. decreasing utility to each increment in wealth.
31. Which of the following two investments would a risk seeker choose: Investment A with an expected outcome of
$1000 and standard deviation of $500, or Investment B with an expected outcome of $1000 and standard deviation
of $200?
A. Investment A because if Investment B is chosen the expected utility from the increase in spread of expected
returns below $1000 outweighs the expected utility from the increase in spread of expected returns above $1000.
B. Investment A because it offers the chance of more wealth.
C. Investment A because the downside risk is greater.
D. Investment B because the downside risk is less.
32. Risk aversion implies that:
A. an investor will prefer a higher expected return than a lower expected return.
B. an investor will refuse to bear any risk at all.
C. an investor will tolerate extra risk if it is expected that the return will compensate them for bearing it.
D. an investor will be indifferent to the level of risk providing that the expected return is identical.
33. Two important assumptions of portfolio theory are:
A. returns from investments are normally distributed and investors seek to minimise transaction costs.
B. returns from investments are normally distributed and investors are risk averse.
C. returns on a portfolio are normally distributed and investors are risk averse.
D. the standard deviation of returns on a portfolio is normally distributed and investors are risk averse.
34. Calculate the expected return from a portfolio consisting of three securities with the following expected returns and
weights:
A. 0.114%
B. 12%
C. 11.4%
D. 36%
35. The variance of a portfolio does not depend on:
A. the proportion of the current market value of the portfolio constituted by each security.
B. the variance of the possible returns of each security.
C. the total market value of the portfolio.
D. the correlation between possible returns on the securities held in the portfolio.
36. An ‘efficient' portfolio is one that:
A. combines assets whose returns are not perfectly correlated.

B. offers the highest expected return for a given level of risk.
C. holds a proportion of all possible assets.
D. combines many diverse assets.
37. Increasing the amount of wealth in Asset A whilst maintaining the entire wealth invested in a portfolio consisting of
two assets only, A and B (assume that the expected return and standard deviation of both assets are A: 0.10 and
0.03, and B: 0.15 and 0.05, respectively):
A. will increase the expected return of the portfolio.

B. may reduce the variance of the portfolio regardless of the correlation coefficient between Assets A and B.
C. will decrease the expected return of the portfolio, but the expected return will be closer to 15% than before.
D. will decrease the expected return of the portfolio, but the expected return will still be greater than if the portfolio
consisted of Asset A only.
38. The efficient frontier:
A. includes those portfolios that offer the maximum expected return for a given level of risk.
B. combines those assets in a portfolio that offer the highest expected return for a given level of risk.
C. includes the portfolio of all possible assets.
D. combines portfolios that offer the maximum level of expected return for a given amount of wealth invested.
39. According to portfolio theory, which of the following assumptions is not essential to the equilibrium pricing of risky
assets?
A. All investors have the same estimate of expected returns and variance of expected returns on each asset.
B. All investors have a common single-period time horizon for investment decisions.
C. All assets are traded in perfect markets.
D. All investors can sell short assets (sell an asset first and then purchase later).
40. Systematic risk represents:
A. diversifiable risk.
B. risk that is unavoidable.
C. risk that is diversifiable.
D. none of the options given.
41. Which of the following is not an example of unsystematic risk?
A. Changes in the level of interest rates.

B. The chief executive officer resigns.
C. A legal suit against a company for environmental pollution.
D. The development of a new product line.
42. What is the expected return on an asset with a beta of 2.0, if the risk-free rate of interest is 5% and the expected
return on the market portfolio is 10%?
A. 12.5%
B. 20%
C. 10%
D. 15%
43. Beta is a measure of the extent to which:
A. the returns on the stock market as a whole change over time.

B. a security's risk can be eliminated by proper diversification.
C. the returns on a given stock move with the stock market.
D. a security's risk can be eliminated by random diversification.
44. From the following information, calculate the expected return and standard deviation of a portfolio that consists of
60% of Security A (expected return of 0.10 and standard deviation of 0.03) and 40% of Security B (expected return of
0.20 and standard deviation of 0.05), assuming the co-variance between A and B is -0.0012.
A. E(R) = 0.152, σ = 0.161

B. E(R) = 0.138, σ = 0.012
C. E(R) = 0.14, σ = 0.085
D. E(R) = 0.14, σ = 0.012
45. The relationship between the required rate of return for a security and market risk is:
A. non-linear.
B. linear.
C. denoted by the capital market line.
D. concave.
46. The straight line passing through the risk-free rate of return on the vertical axis and the expected return–standard
deviation point for the market portfolio is known as the:
A. security market line.

B. capital market line.
C. characteristic line.
D. efficient frontier.
47. Which of the following is typically used in empirical studies as a proxy for the market portfolio?
A. Consumer price index.

B. All Ordinaries Accumulation Index.
C. Treasury notes.
D. GDP.
48. A popular measure of risk in corporate finance called the value at risk (VaR), which is defined as:
A. the best return from a high risk investment.

B. the worst loss that is possible under normal market conditions.
C. the worst possible loss under any market conditions.
D. the worst return from a low risk investment.
49. The Fama–French three-factor model of expected returns includes the following three factors:
A. the market risk premium, the size of firms and the risk free rate.
B. the risk free rate, the market risk premium and price earnings ratios.
C. the market risk premium, the size of firms and book-to-market ratios.
D. the market risk premium, the risk free rate and book-to-market ratios.
50. After adjusting for risk, the returns to a portfolio can differ from the benchmark portfolio as a result of:
A. asset allocation.
B. market timing.
C. random events.
D. all of the given answers.
51. An investor would like to evaluate the performance of her portfolio using the Sharpe ratio. The past year realised
return and standard deviation of returns of the portfolio, the benchmark portfolio, given by the S&P/ASX share price
index, and government bonds are:
Has the portfolio:
A. underperformed relative to the benchmark.

B. outperformed the market benchmark on a risk-adjusted basis.
C. underperformed the market benchmark on a risk-adjusted basis.
D. outperformed the Government Bonds.
52. An investor would like to evaluate the performance of her portfolio using the Treynor ratio. The past year realised
return and systematic risk of the portfolio, the benchmark portfolio, given by the S&P/ASX share price index, and
government bonds are:
Has the portfolio:

53. Which of the following is NOT a portfolio performance measure?
A. Jensen's beta.
B. The Sharpe ratio.
C. The Treynor Ratio.
D. Jenson's alpha.
54. Mehra and Prescott (1985) showed that a long-term risk premium such as that found in the US, Canada, the UK and
Australia:
A. exceeds 3% p.a.
B. does not exceed 3% p.a.
C. can be explained by standard models of risk and return.
D. cannot be explained by standard models of risk and return.
55. Claus and Thomas (2001) use forecasts by security analysts and conclude that the market risk premium is
approximately:
A. 2% p.a.
B. 3% p.a.
C. 4% p.a.
D. 1% p.a.
56. Fama and French (2002) use the dividend growth model and conclude that the market risk premium is now of the
order of:
A. 2% p.a.
B. 1% p.a.
C. 3% p.a.
D. 5.5% p.a.
57. Standard deviation is measured as the _______________ of variance.
________________________________________
58. A risk __________ investor will make their investment decision purely on the return generated by a project.
________________________________________
59. The _____________________ plots the relationship between the expected return and beta of a security.
________________________________________
60. The _______________ is a curve that includes all portfolios with the highest return for a given level of risk.
________________________________________
61. The Fama–French three-factor model of asset pricing attempted to improve the CAPM by integrating variables that
measured a firm's size and its ___________________.
________________________________________
62. In order to benchmark the performance of a portfolio it is important to compare it to a portfolio of

___________________.
________________________________________
63. Where two securities are perfectly positively correlated, there is no reduction in unsystematic risk through
diversification.
True False
64. The typical utility-to-wealth function for a risk-seeking investor is upward sloping.
True False
65. Portfolio theory, as initially developed by Markowitz (1952), assumes that the returns from investments are normally
distributed.
True False
66. A well-diversified portfolio should have a beta significantly less than one.
True False
67. The Capital Asset Pricing Model (CAPM) assumes that all securities are priced according to their unsystematic risk.
True False
68. Beta is calculated by finding the co-variance between the return on the asset and the return on the market and
dividing it by the variance of the return on the market.
True False
69. If an asset has a beta of 0.8, this indicates that the expected return of the asset should be greater than the market
portfolio.
True False
70. The Fama–French three-factor model of expected returns indicates a linear relationship according to the size of the
firm and book-to-market ratios.
True False
71. A simple performance benchmark is to compare the return of a well diversified portfolio of domestic shares to the
S&P/ASX200 Index.
True False
72. Explain the difference between systematic and unsystematic risk.
73. What are the two components of expected return in the CAPM?
74. Explain the key differences between the Capital Market Line and the Security Market Line.
Has the portfolio:
76. You are considering investing in ZIN mining corp. Research into the company suggests that the company will
achieve one of three possible returns over the next 12 months. The possible returns along with the probability of
each are listed in the following table.
a. What is the expected return of ZIN?

b. What is the standard deviation of returns of ZIN?
You also consider the stock WMC, which has an expected return of 15% and a standard deviation of 4%. If you
create a portfolio with 60% weight on ZIN and 40% WMC and the correlation coefficient is 0.8, then:
c. What is the expected return of this portfolio?
d. What is the risk of the portfolio?
Chapter 07 Testbank Key
1. Which distribution is a list of the possible dollar returns from the investment together with the probability of each
return?
D. utility function.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
EQUIS: Apply knowledge
Graduate Attributes: Problem-solving
Learning Objective: 07-01 Understand how return and risk are defined and measured
Section: 7.2 Return and risk
2. Variance is best defined as:
A. difference of opinion in expected returns.

B. the mean of the squared deviations from the expected value.
C. the median difference between the most probable outcome and least probable outcome.
D. the difference between the expected return and the actual return.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
3. Which distribution can be fully described by its expected value and standard deviation?
D. None of the given options.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
4. Which investor attaches decreasing utility to each increment in wealth?
C. A risk-averse investor.
D. All of the given options.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 07-02 Understand the concept of risk aversion by investors
Section: 7.3 The investor's utility function
5. Which investor attaches equal utility to each increment in wealth?
B. A risk-averse investor.
C. A well diversified investor.
D. A risk-neutral investor.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
6. An investor's preferences regarding expected return and risk can be illustrated using:
A. yield curves.
B. a normal distribution.
C. indifference curves.
D. an efficient portfolio.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
7. Which investor has a positive attitude towards expected return and a negative attitude towards risk?
A. A risk-averse investor.
C. A risk-seeking investor.
D. A well-diversified investor.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
8. Portfolio theory was initially developed by:
A. Fama (1970).
B. Markowitz (1952).
C. Modigliani and Miller (1958).
D. Sharpe (1950).
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 07-03 Explain how diversification reduces risk
Section: 7.5 Portfolio theory and diversification
9. Assume two securities A and B. The correlation coefficient between these two securities can be written as:
A.
B.
C.
D.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
Learning Objective: 07-04 explain the concept of efficient portfolios
10. Which type of risk is unique to a firm and may be eliminated by diversification?
A. Macro risk.
B. Unsystematic risk.
C. Systematic risk.
D. Total risk.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
11. Which statement best describes the market portfolio?
A. Portfolio of all traded assets in the universe.

B. Portfolio of all assets weighted according to their market capitalisation.
C. Portfolio of all risky assets weighted according to their value.
D. Portfolio of all risky assets weighted according to their market capitalisation.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
Learning Objective: 07-08 Explain the relationship between returns and risk proposed by the capital asset pricing model
Section: 7.6 The pricing of risky assets
12. The capital market line:
A. describes the equilibrium risk-return relationship for efficient portfolios.

B. describes the equilibrium risk-return relationship for all portfolios.
C. describes the equilibrium risk-return relationship for riskless portfolios.
D. describes the equilibrium risk-return relationship for risky portfolios.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 07-07 explain why systematic risk is important to investors
13. A security market line:
A. explains the co-variance between the returns on the risky asset and the market portfolio.
B. explains the co-variance between the returns on the risky asset and a riskless asset.
C. is a graphical representation of the CAPM.
D. is a graphical representation of the CML.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
The expected value from this is:
A. $3500
B. $4000
C. $3000
D. $2500
AACSB: Analytic
Blooms: Application
Difficulty: Medium
The range and standard deviation of the distribution are:
A. $4000 and $1095.45, respectively.

B. $1095.45 and $4000, respectively.
C. $5000 and $1095.45, respectively.
D. $4000 and $2000, respectively.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Hard
The mean, range and standard deviation are:
A. 0.06, 0.10 and 0.0693, respectively.

B. 0.06, 0.08 and 0.0693, respectively.
C. 0.06, 0.08 and 0.022, respectively.
D. 0.07, 0.10 and 0.022, respectively.
AACSB: Analytic
Blooms: Application
Difficulty: Hard
17. It is often assumed that an investment's distribution of returns follows a normal distribution because:
A. investment distributions are not usually bell shaped.

B. the expected value is the weighted average expected return from an investment.
C. the expected value gives a measurement of risk.
D. it enables an investment to be described by its expected value and standard deviation.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
18. What would be the shape of the probability distribution for completely certain returns?
A. A vertical line.
B. Bell shaped but with a high peak.
C. A horizontal line.
D. Two or more vertical lines.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
19. What would be the shape of the probability distribution for completely uncertain returns?
A. Horizontal line above the x axis.

B. Vertical line.
C. Horizontal line along the x axis.
D. Bell-shaped but very flat.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
20. Which statement best describes the attitude of investors towards risk?
A. Investors may behave as though they are risk seekers for small investments.
B. Investors behave as though they are risk averse for investments of significant size.
C. For a risk-averse investor, the standard deviation of the return distribution is a relevant measure of risk.
D. All of the given answers.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
21. The benefit of diversification to an investor is the reduction of:
A. brokerage costs.
B. brokerage costs and risk.
C. risk.
D. research time.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
22. Which of the following statements is true?
A. Two assets that are perfectly negatively correlated can produce a portfolio with zero variance.
B. Adding an asset to a portfolio by random selection will reduce the risk of a portfolio.
C. Adding a riskless security to a portfolio will increase its overall risk.
D. The amount of risk reduction that can be achieved by adding a new security to an existing portfolio increases
as the correlation between the expected returns of the new security and the expected returns on the existing
portfolio increases.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
23. Which of the following investments does a rational investor prefer?
A. Investment A: E(R) = 10%, = 3%

B. Investment B: E(R) = 10%, = 5%
C. Investment C: E(R) = 11%, = 3%
D. None of the given options, as a rational investor would require more information from which to make a
decision.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
deviation of 4%. What is the likelihood of making a negative return? (Hint: the area under a curve for 1 std dev is
34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%).
A. 47.73%
B. 34.13%
C. 15.87%
D. 2.27%
AACSB: Analytic
Blooms: Application
Difficulty: Hard
deviation of 5%. What is the likelihood of making a positive return? (Hint: the area under a curve for 1 std dev is
34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%.)
A. 84.13%
B. 2.27%
C. 97.73%
D. 15.87%
AACSB: Analytic
Blooms: Application
Difficulty: Hard
deviation of 3%. What is the likelihood of receiving a return that is equal to or less than 19%? (Hint: the area
under a curve for 1 std dev is 34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%.)
A. 97.73%
B. 84.13%
C. 15.87%
D. 2.27%
AACSB: Analytic
Blooms: Application
Difficulty: Hard
27. Suppose you have the choice between two investments – one that pays fixed interest of 4% p.a., and another
whose returns are normally distributed with an expected return of 10% and standard deviation of 3%. What is the
likelihood of receiving a return on the second investment that is equal to or greater than that which can be
received from the first investment? (Hint: the area under a curve for 1 std dev is 34.13%, 2 std dev is 47.73% and
3 std dev is 49.87%.)
A. 97.73%
B. 84.13%
C. 65.87%
D. 52.27%
AACSB: Analytic
Blooms: Application
Difficulty: Hard
28. A risk-averse investor attaches:

C. increasing utility to each increment in risk.
D. no utility to each increment in risk.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
29. A risk-neutral investor attaches:

D. equal utility to each increment in wealth.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
30. A risk-seeking investor attaches:

B. increasing utility to each decrement in risk.
D. decreasing utility to each increment in wealth.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
31. Which of the following two investments would a risk seeker choose: Investment A with an expected outcome of
$1000 and standard deviation of $500, or Investment B with an expected outcome of $1000 and standard
deviation of $200?
A. Investment A because if Investment B is chosen the expected utility from the increase in spread of expected
returns below $1000 outweighs the expected utility from the increase in spread of expected returns above
$1000.
B. Investment A because it offers the chance of more wealth.
C. Investment A because the downside risk is greater.
D. Investment B because the downside risk is less.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
32. Risk aversion implies that:
A. an investor will prefer a higher expected return than a lower expected return.
B. an investor will refuse to bear any risk at all.
C. an investor will tolerate extra risk if it is expected that the return will compensate them for bearing it.
D. an investor will be indifferent to the level of risk providing that the expected return is identical.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
33. Two important assumptions of portfolio theory are:
A. returns from investments are normally distributed and investors seek to minimise transaction costs.
B. returns from investments are normally distributed and investors are risk averse.
C. returns on a portfolio are normally distributed and investors are risk averse.
D. the standard deviation of returns on a portfolio is normally distributed and investors are risk averse.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
34. Calculate the expected return from a portfolio consisting of three securities with the following expected returns and
weights:
A. 0.114%
B. 12%
C. 11.4%
D. 36%
AACSB: Analytic
Blooms: Application
Difficulty: Medium
35. The variance of a portfolio does not depend on:
A. the proportion of the current market value of the portfolio constituted by each security.
B. the variance of the possible returns of each security.
C. the total market value of the portfolio.
D. the correlation between possible returns on the securities held in the portfolio.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
36. An ‘efficient' portfolio is one that:
A. combines assets whose returns are not perfectly correlated.

B. offers the highest expected return for a given level of risk.
C. holds a proportion of all possible assets.
D. combines many diverse assets.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 07-05 understand the importance of covariance between returns on risky assets in determining the risk of a portfolio
37. Increasing the amount of wealth in Asset A whilst maintaining the entire wealth invested in a portfolio consisting
of two assets only, A and B (assume that the expected return and standard deviation of both assets are A: 0.10
and 0.03, and B: 0.15 and 0.05, respectively):
A. will increase the expected return of the portfolio.

B. may reduce the variance of the portfolio regardless of the correlation coefficient between Assets A and B.
C. will decrease the expected return of the portfolio, but the expected return will be closer to 15% than before.
D. will decrease the expected return of the portfolio, but the expected return will still be greater than if the
portfolio consisted of Asset A only.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Hard
38. The efficient frontier:
A. includes those portfolios that offer the maximum expected return for a given level of risk.
B. combines those assets in a portfolio that offer the highest expected return for a given level of risk.
C. includes the portfolio of all possible assets.
D. combines portfolios that offer the maximum level of expected return for a given amount of wealth invested.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 07-05 understand the importance of covariance between returns on risky assets in determining the risk of a portfolio
39. According to portfolio theory, which of the following assumptions is not essential to the equilibrium pricing of risky
assets?
A. All investors have the same estimate of expected returns and variance of expected returns on each asset.
B. All investors have a common single-period time horizon for investment decisions.
C. All assets are traded in perfect markets.
D. All investors can sell short assets (sell an asset first and then purchase later).
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
40. Systematic risk represents:
A. diversifiable risk.
B. risk that is unavoidable.
C. risk that is diversifiable.
D. none of the options given.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 07-06 explain the distinction between systematic and unsystematic risk
41. Which of the following is not an example of unsystematic risk?
A. Changes in the level of interest rates.

B. The chief executive officer resigns.
C. A legal suit against a company for environmental pollution.
D. The development of a new product line.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
Learning Objective: 07-06 explain the distinction between systematic and unsystematic risk
42. What is the expected return on an asset with a beta of 2.0, if the risk-free rate of interest is 5% and the expected
return on the market portfolio is 10%?
A. 12.5%
B. 20%
C. 10%
D. 15%
AACSB: Analytic
Blooms: Application
Difficulty: Medium
43. Beta is a measure of the extent to which:
A. the returns on the stock market as a whole change over time.

B. a security's risk can be eliminated by proper diversification.
C. the returns on a given stock move with the stock market.
D. a security's risk can be eliminated by random diversification.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
44. From the following information, calculate the expected return and standard deviation of a portfolio that consists of
60% of Security A (expected return of 0.10 and standard deviation of 0.03) and 40% of Security B (expected
return of 0.20 and standard deviation of 0.05), assuming the co-variance between A and B is -0.0012.
A. E(R) = 0.152, σ = 0.161

B. E(R) = 0.138, σ = 0.012
C. E(R) = 0.14, σ = 0.085
D. E(R) = 0.14, σ = 0.012
AACSB: Analytic
Blooms: Application
Difficulty: Hard
Learning Objective: 07-04 explain the concept of efficient portfolios
45. The relationship between the required rate of return for a security and market risk is:
A. non-linear.
B. linear.
C. denoted by the capital market line.
D. concave.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
46. The straight line passing through the risk-free rate of return on the vertical axis and the expected return–standard
deviation point for the market portfolio is known as the:
A. security market line.

B. capital market line.
C. characteristic line.
D. efficient frontier.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
47. Which of the following is typically used in empirical studies as a proxy for the market portfolio?
A. Consumer price index.

B. All Ordinaries Accumulation Index.
C. Treasury notes.
D. GDP.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
48. A popular measure of risk in corporate finance called the value at risk (VaR), which is defined as:
A. the best return from a high risk investment.

B. the worst loss that is possible under normal market conditions.
C. the worst possible loss under any market conditions.
D. the worst return from a low risk investment.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
section: EMPTY
49. The Fama–French three-factor model of expected returns includes the following three factors:
A. the market risk premium, the size of firms and the risk free rate.
B. the risk free rate, the market risk premium and price earnings ratios.
C. the market risk premium, the size of firms and book-to-market ratios.
D. the market risk premium, the risk free rate and book-to-market ratios.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
Learning Objective: 07-09 Understand the relationship between the capital asset pricing model and models that include additional factors
Section: 7.7 Additional factors that explain returns
50. After adjusting for risk, the returns to a portfolio can differ from the benchmark portfolio as a result of:
A. asset allocation.
B. market timing.
C. random events.
D. all of the given answers.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
51. An investor would like to evaluate the performance of her portfolio using the Sharpe ratio. The past year realised
return and standard deviation of returns of the portfolio, the benchmark portfolio, given by the S&P/ASX share
price index, and government bonds are:
Has the portfolio:

AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
Learning Objective: 07-11 Distinguish between alternative methods of appraising the performance of an investment portfolio
Section: 7.8 Portfolio performance appraisal
Has the portfolio:

AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
53. Which of the following is NOT a portfolio performance measure?
A. Jensen's beta.
B. The Sharpe ratio.
C. The Treynor Ratio.
D. Jenson's alpha.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
54. Mehra and Prescott (1985) showed that a long-term risk premium such as that found in the US, Canada, the UK
and Australia:
A. exceeds 3% p.a.
B. does not exceed 3% p.a.
C. can be explained by standard models of risk and return.
D. cannot be explained by standard models of risk and return.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
55. Claus and Thomas (2001) use forecasts by security analysts and conclude that the market risk premium is
approximately:
A. 2% p.a.
B. 3% p.a.
C. 4% p.a.
D. 1% p.a.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
56. Fama and French (2002) use the dividend growth model and conclude that the market risk premium is now of the
order of:
A. 2% p.a.
B. 1% p.a.
C. 3% p.a.
D. 5.5% p.a.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
57. Standard deviation is measured as the _______________ of variance.
square root
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
58. A risk __________ investor will make their investment decision purely on the return generated by a project.
neutral
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
59. The _____________________ plots the relationship between the expected return and beta of a security.
security market line
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
60. The _______________ is a curve that includes all portfolios with the highest return for a given level of risk.
efficient frontier
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
61. The Fama–French three-factor model of asset pricing attempted to improve the CAPM by integrating variables
that measured a firm's size and its ___________________.
book-to-market value
AACSB: Analytic
Blooms: Knowledge
Difficulty: Hard
62. In order to benchmark the performance of a portfolio it is important to compare it to a portfolio of

___________________.
similar risk
AACSB: Analytic
Blooms: Knowledge
Difficulty: Hard
63. Where two securities are perfectly positively correlated, there is no reduction in unsystematic risk through
diversification.
TRUE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
64. The typical utility-to-wealth function for a risk-seeking investor is upward sloping.
TRUE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
65. Portfolio theory, as initially developed by Markowitz (1952), assumes that the returns from investments are
normally distributed.
TRUE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
66. A well-diversified portfolio should have a beta significantly less than one.
FALSE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
67. The Capital Asset Pricing Model (CAPM) assumes that all securities are priced according to their unsystematic
risk.
FALSE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Hard
68. Beta is calculated by finding the co-variance between the return on the asset and the return on the market and
dividing it by the variance of the return on the market.
TRUE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
69. If an asset has a beta of 0.8, this indicates that the expected return of the asset should be greater than the
market portfolio.
FALSE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
70. The Fama–French three-factor model of expected returns indicates a linear relationship according to the size of
the firm and book-to-market ratios.
TRUE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
71. A simple performance benchmark is to compare the return of a well diversified portfolio of domestic shares to the
S&P/ASX200 Index.
TRUE
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
72. Explain the difference between systematic and unsystematic risk.
Unsystematic risk is attributable to firm specific factors and can be eliminated by diversification. Systematic risk
affects all assets in the same way and is a result of economy wide factors.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
EQUIS: Communicate
73. What are the two components of expected return in the CAPM?
The first is the risk free rate of return and the second is the risk premium that depends on the assets beta and the
market risk premium.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
EQUIS: Communicate
74. Explain the key differences between the Capital Market Line and the Security Market Line.
The CML plots the relationship between total risk (measured by standard deviation) and expected return efficient
portfolios. The SML plots the relationship between risk and expected return for all assets and portfolios, where
risk is measure by beta.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Medium
EQUIS: Communicate
Has the portfolio:
AACSB: Analytic
Blooms: Knowledge
Difficulty: A Easy
Difficulty: B Hard
Difficulty: C Medium
Difficulty: D Medium
76. You are considering investing in ZIN mining corp. Research into the company suggests that the company will
achieve one of three possible returns over the next 12 months. The possible returns along with the probability of
each are listed in the following table.
a. What is the expected return of ZIN?

b. What is the standard deviation of returns of ZIN?
You also consider the stock WMC, which has an expected return of 15% and a standard deviation of 4%. If you
create a portfolio with 60% weight on ZIN and 40% WMC and the correlation coefficient is 0.8, then:
c. What is the expected return of this portfolio?
d. What is the risk of the portfolio?
AACSB: Analytic
Blooms: Knowledge
Difficulty: A Medium
Difficulty: B Medium
Difficulty: C Medium
Difficulty: D Hard
Chapter 07 Testbank Summary
Category # of Questions
AACSB: Analytic 76
Blooms: Application 10
Blooms: Knowledge 66
Difficulty: A Easy 1
Difficulty: A Medium 1
Difficulty: B Hard 1
Difficulty: B Medium 1
Difficulty: C Medium 2
Difficulty: D Hard 1
Difficulty: D Medium 1
Difficulty: Easy 25
Difficulty: Hard 11
Difficulty: Medium 38
EQUIS: Apply knowledge 73
EQUIS: Communicate 3
Graduate Attributes: Problem-solving 76
Learning Objective: 07-01 Understand how return and risk are defined and measured 17
Learning Objective: 07-02 Understand the concept of risk aversion by investors 14
Learning Objective: 07-03 Explain how diversification reduces risk 6
Learning Objective: 07-04 explain the concept of efficient portfolios 2
Learning Objective: 07- 2
05 understand the importance of covariance between returns on risky assets in determining the risk of a portfolio
Learning Objective: 07-06 explain the distinction between systematic and unsystematic risk 2
Learning Objective: 07-07 explain why systematic risk is important to investors 4
08 Explain the relationship between returns and risk proposed by the capital asset pricing model
09 Understand the relationship between the capital asset pricing model and models that include additional factors
11 Distinguish between alternative methods of appraising the performance of an investment portfolio
Section: 7.2 Return and risk 15
Section: 7.3 The investor's utility function 13
Section: 7.5 Portfolio theory and diversification 18
Section: 7.6 The pricing of risky assets 20
Section: 7.7 Additional factors that explain returns 3
Section: 7.8 Portfolio performance appraisal 6
Another random document with
no related content on Scribd:
currunt, quam vident in sicco, et perforatam. Jam circumspicere,
sociosque nomine vocare. Nemo autem fuit qui responderet. Illi
decem numero erant, armati omnes. Robinson, qui ex præfecto
acceperat inter captivos tres [254]esse qui non nisi metu coacti
venerant in sceleris societatem, Vendredi gubernatoremque ad eos
mittit ; cùmque illi veniam orâssent impetrâssentque, tum armis
redditis eos, quæ ipse præceperit, sedulò exsequi jubet.
Interim qui posteriori scaphâ advecti fuerant, sustulêre

clamorem. Redditur et major à Robinsonis commilitonibus ; hoc enim
ille jusserat, ut advenæ in nemora allicerentur. Illi scilicet, voce
respondentium vix auditâ, sparsi hinc inde per silvas vagantur. Sed
nemine reperto, cùm jam advesperasceret, noctem veriti, ad
scapham redeunt, cursu et vano errore fessi. Atque, ut quisque
occurrit, excipitur ab insidiantibus, quorum in manus sex ita
inciderunt. Cùm quatuor alii reverterentur, mittitur ad hos unus
nautarum in gratiam receptorum, interrogaturus, an sponte armis
abjectis se submittere velint ; nî faciant, insulae procuratorem,
triginta abhinc passibus, quinquaginta milites ex arce eduxisse,
[255]qui ipsos cæderent. Tum Robinson armorum strepitum unà
omnes edere jussit, ad verba legati confirmanda. Priùsque illi terrore
quàm bello vincuntur. « An verò delicti veniam impetraturi sumus ? »
quidam ex iis tandem rogat. Cui præfectus in virgultis latens sic
acclamavit : « Vocem meam agnoscis, Thoma Smith ! Si illicò arma è
manibus ceciderint, vitam habebitis, Atkins excepto. » Scilicet ille
seditionis concitor fuerat. Tum universi statim arma abjicere. Atkins
autem exclamans, præfectum obtestatur ut sibi parcat ignoscatque
commune esse omnium scelus. Præfectus respondet, se, quod
unum posset, procuratoris eum clementiæ commendaturum ; quod
illi placuerit, exspectet.
Quo facto, Vendredi cum tribus nautis ad illos vinciendos
mittitur. Jam Robinson, qui procuratoris personam agebat, accessit
cum præfecto. Hic autem de captivis eos elegit, quibus eam naturæ
bonitatem noverat ut ipsos sceleris commissi verè pœ [256]niteret : hi
ad arcem, cæteri ad speluncam ducuntur. Ex iis qui in antrum anteà
conjecti erant, duos etiam adduci jussit, de quibus benè quoque
sperabat. Quomodo autem cum illis egerit, et quæ posteà acciderint,
restat ut narretur.
[257]
Caput trigesimum.
Fundata colonia. — Robinson relinquit insulam. — Quod accidit

in patriam redeunti. — Quomodo vitam deinde honestam et beatam
degit.
Q uibus culpa remissa fuerat, hi, ante arcem collecti, decem

numero erant. Robinson, procuratoris nomine, qualem eum
esse ducebant, declarat, eâ lege ipsos seditionis veniam
impetraturos ut præfectum legitimum in recuperandâ nave adjuvent.
Quæ sententia etiam captivis denuntiatur. Tum utrisque captivis
simul et liberis unà conversandi copia data est, ut sese mutuò in fide
servandâ confirmarent, cùm hæc sola sontibus pateret salutis via.
Interim fabro lignario mandatur ut al [258]terius scaphæ

perforatæ carinam reficiat. Tum altera præfecto, altera gubernatori
traditur, nautis inter utrumque divisis, cunctique apparato bellico
instructi vela faciunt.
Robinson, cujus fortuna ex eventu hujus incœpti pendebat,

tantâ animi perturbatione sollicitudineque agitabatur, ut stare loco
nesciret : nunc in speluncâ sedere, nunc in collem adscendere ; et
quia noctu oculorum cessabat usus, auribus captare si fortè aliquid è
nave audiret. Augebatur sollicitudo exspectatione signi de quo inter
eos convenerat. Triplex scilicet explosio nondum audita erat, etsi
mediâ nocte ingruente.
Et jam spes omnis abierat, cùm subito fit sonitus è longinquo.

Robinson, quasi è somno repentè excitatus, aures erigit. Sequitur
altera explosio, et deinde tertia. Nunc constat navem esse
expugnatam ; nunc certò in Europam profecturus est. Tum amens
lætitiâ devolare, socium in [259]gramine recubantem excitare,
amplecti, deinde ad arcem currere, sarcinasque raptim colligere.
Die nondum exorto, ad collem rursus properat ; eòque ubi navis

in anchoris stabat, oculos intendit, lucem diei plenam exspectans :
ac brevì conspicit præfectum navis, collem, nonnullis ipsum
comitantibus, conscendentem. Robinson uno impetu ejus in
amplexus provolat. Tum præfectus narrat se nave feliciter admodum
potitum esse, nemine occiso, nec vulnerato quidem ; scilicet obscurâ
nocte ita evenisse, ut nec agnosceretur ipse, nec comites à nave
prohiberentur. Turbulentissimos seditionis auctores sibi quidem
obstitisse, captos verò in vincula fuisse conjectos. His dictis, cibos
quosdam delicatiores è nave afferri jubet, lætique omnes lautissimo
convivio recreati sunt.
Deinde præfectus Robinsonem rogavit, quidnam nunc sibi

faciendum mandaret, quo ipsi gratiam persolveret. Huic
Robin [260]son : « Præter hesterna promissa, hæc tria te rogabo :
primùm quidem ut hìc commoreris, donec pater socii mei redierit ;
tum ut me meosque in nave excipias ; denique ut seditionis
auctoribus veniam condones. Hæc sola delicti pœna sit in hâc insulâ
deseri. »
Præfectus, hæc pacta conventaque quàm religiosissimè
servaturum se pollicitus, captivos adduci jubet, pessimisque eorum
designatis pœnam irrogatam denuntiat ; neque illi sine lætitiâ hoc
audierunt, conscii quippe capitalis admissi facinoris. Robinson eos
benignè docuit quomodo victum quærerent, illisque res suas omnes
relicturum se promisit.
Dum noster hæc loquitur, Vendredi magno cursu anhelans

nuntiat patrem cum Hispanis advenisse. Cuncti igitur illis obviam
properant. Vendredi, cæteros prævertens, in amplexus patris
præcurrerat. Robinson non sine admiratione duas mulieres inter
advenas conspexit ; Dominicusque [261]interrogatus docet uxores
esse duorum Hispanorum, quas illi in ipsâ regione susceperant. Hi
verò ubi audierunt Robinsonem mox profecturum, nonnullosque
remiges in insulâ relicturum esse, rogaverunt ut sibi quoque liceret in
eâ remanere ; se enim, omnibus auditis quæ alii memoraverant,
jucundiorem illâ sibi sedem non optare. Quibus precibus Robinson
annuit libentissimè ; gaudebat inprimis duos hìc spectatâ probitate
viros relinquere. Sperabat enim fore ut eorum operâ et exemplo
cæteri ad meliorem frugem reducerentur. Hâc mente alios omnes
eorum auctoritati subjicere constituit.
Itaque universos arcessi jubet : sex Angli erant, et duo Hispani

cum uxoribus. Quibus convocatis, suam Robinson declaravit
voluntatem, his verbis : « Neminem fore spero, qui mihi jus deneget
de rebus meis, id est, hâc insulâ, cum omnibus quæ in eâ sunt,
arbitrio meo statuendi. Opto autem ut omnium cujusque
ves [262]trûm, qui hìc remansuri estis, conditio sit beatissima ; atque
ad id assequendum, certas leges non habentibus meum est
instituere, vestrum autem sequi.
« Hæc igitur accipite.
« Hos ambo Hispanos ego meos in insula vicarios constituo. Hi

præcipient ; vos parebitis. His committo apparatum omnem bellicum,
variaque instrumenta, eâ tamen lege ut illi vobis necessaria
præbeant ; vos autem cum iis honeste in pace vivatis.
« Ac principio Deum colite ; nulla enim civitas firma, nisi

fundamentum sit pietas.
« Proxima pietati sit justitia. Jus suum cuique tribuatur, ac ne cui

quis noceat.
« De cæteris ambo Hispani viderint. Illi fines agris assignabunt,

juraque, prout res postulabit, privata publicaque statuent.
« Forsan et olim dabitur de vobis audire, aut me aliquandò

juvabit extre [263]mum in hâc insulâ mihi carissimâ vitæ, tempus
agere. Væ illi qui intereà instituta mea transgressus fuerit ! Ego
hominem in cymbâ impositum fluctibus sævissima tempestate
agitatis tradam hauriendum. »
His auditis, assensêre omnes, obedientiamque polliciti sunt.
Tum noster ea notavit quæ secum aveheret : scilicet 1º. vestem

è pellibus à se ipso confectam, cum umbellâ ; 2º. hastam propriâ
quoque arte perfectam, arcum, securimque siliceam ; 3º. psittacum,
canem villosum, lamasque duos ; 4º. varia instrumenta, quæ, cùm
esset solitarius, fabricaverat. His cunctis in navem transportatis,
secundoque spirante vento, proximo die proficisci constituunt.
Jamque tempus adest. Tum Robinson lacrymans eos qui remansuri
erant ad concordiam pietatemque sequendam denuò hortatus,
ultimum vale acclamat, et comitibus Vendredi Dominico [264]que
navem conscendit. Hic inter transeundum morbo assumptus est.
Felicissimus ad Portsmuthiam cursus fuit. Cùm navem

Robinson opportunè hìc invenisset Hamburgum tendentem, ab
Anglicæ navis præfecto discessit, atque alteram conscendere
properavit : hæc brevì solvit anchoras.
Dulcissima jam Robinsonis patria è longinquo cernitur ; jam in

ostium Albis advenêre, cùm subitò sæva tempestas exoritur,
navemque vi magna in oram conjicit. Tum quidquid valet diligentia,
quidquid peritia, adhibetur ; sed frustrà : venti vehementia, omni
conatu major, navem abreptam in arenas agit tantâ vi, ut carina
disrumperetur. Irruit extemplo in eam ingens aquæ vis, adeò ut de eâ
conservandâ omnes desperarent. Navigantibus vix datur copia in
scaphas desiliendi, ut morti, si fieri possit, se eripiant.
Sic igitur Robinson cùm denuò naufragium fecisset, miser in

portum proximum [265]advenit, neque quidquam servavit præter
canem, qui vectum in scaphâ dominum natando secutus est, et
psittacum in humero ejus sedentem. Multis post diebus, accepit inter
varias res servatas umbellam vestemque pelliceam fuisse repertas.
Portus ad quem scapha appulerat, octo millia passuum ab

Hamburgo aberat. Audiit patrem suum senem bonâ valetudine
gaudere, matrem verò optimam vixisse ; quodquidem gravissimo
eum dolore affecit. Jam navi Hamburgum profectus, quatuor
horarum spatio eò advenit. Cùm sequente cane et psittaco humero
insidente in terram descendisset, per circumfusam spectantium
turbam in hospitium proximum se contulit. Inde nuntio ad patrem
misso, curavit ut bonus senex ad filium revisendum cautè
præpararetur, quòd pater tantæ non capax lætitiæ occubuisset.
Jam filius ipse per plateas satis sibi cognitas ad patrios penates
provolat, domumque assecutus in patris gaudio trepidantis
[266]amplexus ruit. « Ô pater ! — Ô fili ! » Hæc tantùm ambo eloqui
potuerunt. Muti, trepidi, spirituque intercluso, alter alterius è collo
pendent, donec vis benigna lacrymarum animum utriusque
oppressum levavit.
Intereà Vendredi miratur frequentem tectis urbem, stupetque

inhians innumera rerum miracula, quæ nunc undique oculis
obversantur. Quorum adspectu satiari non potuit. Ac primo die
nullam rem ab aliâ distinguebat, tantâ animi perturbatione, ut esset
quasi hebes oculis et animo.
Pater Robinsonis institor erat. Proptereà optavit ut filius in

mercaturâ exerceretur, seque præstaret eum qui sibi defuncto
succederet. Robinson verò, labori consuetudine induratus, patrem
rogavit, ut sibi liceret scriniariorum artem discere. Itaque cum socio
scriniarii cujusdam disciplinæ se tradidit, atque, intra unius anni
curriculum, uterque in eâ arte tantùm profecerat, ut ipsi magistrorum
dignitatem assequerentur. [267]Quo facto, officinâ communi institutâ,
amicitiam inter se, summo studiorum voluntatumque consensu, ad
extremum vitæ diem coluerunt.
Et sic perpetuâ tranquillitate, sanitate industriâque fortunati

ambo vixêre ad summam senectutem ; posterique libenter retinebunt
duorum memoriam hominum, qui cæteris documento erunt,
quomodo suæ quisque felicitatis artifex esse possit.
FINIS.
RŌBINSON CRŪSŌEUS
Latīnē scrīpsit F. J. Goffaux, hūmāniōrum litterārum ōlim professor
Puerīs dant crustula blandī

Doctōrēs, elementa velint ut discere prīma.
Hor. Sat. 1, v. 25.
Lēctōrī.
S aepe animadversum est adulēscentulīs prīmum Latīnārum

litterārum līmen ingressīs nōnnihil, fastīdiī rērum gravitāte
afferrī. Itaque exīstimāvī, nōn parum aetātī tenerae esse prōfutūrum,
sī quis susciperet aliquod ejusmodī opusculum, quod et docēret
simul et oblectāret. Atque is mihi vīsus est, quī fīnem hunc
assequerētur, scrīptus apud Anglōs dē Rōbinsōnis cāsibus liber, dē
quō Russoeus noster : Hunc prīmum leget Aemilius.
Cum autem Rōbinsōnis Anglicī fābulāris historia multa

dīgressiōne luxuriet, atque in omnibus, quae ad puerōs pertinent,
satietātī fastīdiōque sit occurrendum, placuit potissimum sēligere
optima ex similī dē eōdem [vi] Rōbinsōne fābulā, quam Germānicē
scrīpsit Henrīcus Campe. Hunc igitur auctōrem eō libentius secūtus
fuī, quod ejus nārrātiō aspersa sit sententiīs quibus juvenum animī
ad pietātem, cōnstantiam et sōbrietātem īnfōrmentur.
Habēs itaque, Lēctor benevole, libellum nūllā sānē aliā laude

commendandum, nisi meō dē juventūte bene merendī studiō. Quō
impulsus, in id praecipuē incubuī, ut, aptātō māteriae stylō,
grammaticās, quantum fierī poterat, rēgulās inculcārem ; nōn
splendidā gravīque (rēs enim nōn ferēbat), sed simplicī et ad captum
legentium accommodātā ōrātiōne. Quātenus scopum attigerim,
jūdicābunt, quī exiguum hoc opus legere nōn dēdignābuntur ; sed
ōrō meminerint mē tīrōnum grātiā scrīpsisse.
Index capitum
I. Rōbinsōnis ortus, indolēs, ēducātiō. — Cupīdō peregrīnandī. —

Discessus ā parentibus. — Profectiō in Angliam. — Īnfausta initia.
— Tempestās. — Nāvis obruta flūctibus. — Rōbinson, aliā
exceptus, advenit Londinium, unde solvit ad Guineam.
II. Rōbinson pergit iter. — Mala ōmina. — Nāvis incēnsa. — Alia
flūctibus jactāta. — Advehitur ad īnsulās Canāriās. — Dēscrīptiō
locī illīus amoenissimī. — Inde profectus ad Americam naufragium
facit.
III. Sēra Rōbinsōnis paenitentia. — Dēspērātiō. — Vītam miserē
sustentat. — Habitat in spēluncā.
IV. Rōbinson reperit pōma eximiae magnitūdinis. — Sibi cōnficit
varia īnstrūmenta. — Fūniculōs. — Strātum. — Umbellam. —
Pēram. — Kalendārium.
V. Rōbinson īnsulam perlūstrat. — Magnus terror. — In gaudium
vertitur. — Dēscrīptiō lamae. — Ūnum occīdit. — Sed igne caret.
— Carnem mōre Tartarōrum coquit.
VI. Turbō ingēns. — Tempestās, unde magnum Rōbinsōnī
beneficium. — Taedium sōlitūdinis. — Arānea.
VII. Praeda ingēns. — Dēest rēs māximē necessāria. — Vōta irrita.
— Ambulātiō. — Natātiō. — Rēs variae.
VIII. Lama mānsuēfacta. — Pullī. — Rēs variae.
IX. Terrae mōtus. — Mōns ignivomus. — Lamae vī aquārum abreptī.
— Spēlunca Rōbinsōnis dīruta.
X. Rōbinson habitāculum reficit. — Parat sibi alimenta in hiemem. —
Imbribus continuīs impedītus domī, fingit vāsa. — Nectit rēte. —
Arcum et sagittās cōnficit.
XI. Summae Rōbinsōnis miseriae. — Ab īnsectīs īnfestātur. —
Vestēs ex pellibus sibi cōnficit. — Incidit in gravem morbum.
XII. Convalēscit ex morbō. — Māximī lūctūs. — Parva gaudia. —
Psittacus.
XIII. Multus labor in excavandā scaphā. — Rōbinsōnis cōnstantia. —
Quōmodo diem inter variās occupātiōnēs distribuit. — In bellicīs
artibus sē exercet.
XIV. Rōbinson īnsulam peragrat. — Vestīgia hominum reperit. —
Summus terror. — Prōspicit crānia, ossa, manūs, pedēs. — Quod
territō et fugientī accidit.
XV. Epulae atrōcēs. — Proelium. — Fortitūdō Rōbinsōnis. —
Vendredi servātus.
XVI. Rōbinson parātus ad obsidiōnem ferendam. — Vendredi
dēscrībitur. — Quārē sīc appellātus.
XVII. Orīgō rēgiae potestātis. — Rōbinson abundat opibus. — Habet
subditōs. — Vendredi novō vīvendī genere dēlectātur.
XVIII. Suspīciō in laetitiam et admīrātiōnem versa. — Cāsus quī
rīsum legentī movēbit. — Rēbus secundīs adversae levantur.
XIX. Rōbinson habitāculum fossā et pālīs mūnit. — Docet socium
Germānicē loquī. — Ambō scapham fabricāre statuunt.
XX. Pluviārum tempus. — Sociī nectunt strāgulās, rētia. — Cymba
cōnficitur.
XXI. Rōbinson et Vendredi, īnsulā relictā, marī sē committunt. —
Summa perīcula in quibus versantur.
XXII. Ambō ē perīculō sē expediunt. — Reversī in īnsulam, hortum
colunt. — Piscantur ; natant ; vēnantur. — Novum iter suscipiunt.
XXIII. Rēs multae et magnae. — Tempestās. — Fragor tonitruum. —
Sonitus aēneī tormentī. — Magna nāvis dērelicta. — Vendredi ad
illam adnatat. — Ignōta animālia. — Canis. — Capra. — Ratis.
XXIV. Multae opēs repertae. — Cibī. — Supellēx. — Īnstrūmenta. —
Vestēs. — Sclopēta. — Rōbinson repente dīves.
XXV. Vendredi servat Rōbinsōnem. — Opēs ā lītore domum
advectae auxiliō canis et lamārum. — Mūnīmenta arcī addita. —
Rōbinson, faber factus et agricola, vīvit beātē.
XXVI. Adsunt ! adsunt ! — Arma inter sociōs dīviduntur. — Parātur
bellum. — Duo virī adversus quīnquāgintā. — Victōris clēmentia.
XXVII. Vendredi patrem suum invenit. — Hispānus nārrat suōs
cāsūs.
XXVIII. Cōntiō advocāta. — Lēgātī missī. — Lēgēs īnstitūtae. —
Spēlunca. — Mōnstrum.
XXIX. Nāvis anglica appulsa ad īnsulam. — Quō cāsū. — Magna
Rōbinsōnis in praefectum merita. — Spēs līberātiōnis.
XXX. Fundāta colōnia. — Rōbinson relinquit īnsulam. — Quod
accidit in patriam redeuntī. — Quōmodo vītam deinde honestam et
beātam dēgit.
[1]
RŌBINSON CRŪSŌEUS.
Caput prīmum.
Rōbinsōnis ortus, indolēs, ēducātiō. — Cupīdō peregrīnandī. —

Discessus ā parentibus. — Profectiō in Angliam. — Īnfausta initia. —
Tempestās. — Nāvis obruta flūctibus. — Rōbinson, aliā exceptus,
advenit Londinium, unde solvit ad Guineam.
E rat Hamburgī, in urbe apud Germānōs celeberrimā, vir

quīdam, cui nōmen Rōbinson : suscēpit ex uxōre trēs fīliōs.
Māximus nātū, armōrum studiōsior quam librōrum, tractāre ā

tenerīs gladiōs, ōr [2]dine mīlitārī puerōs īnstruere, aurēs vīcīnōrum
repetītō tympanī sonitū obtundere ; vixque adulēscēns factus, ē fictīs
certāminibus ad vēra prōcurrēns, mīlitiae nōmen suum dedit.
Cum ille didicisset per aliquot mēnsēs stāre et sequī, vertere

corpus ad sinistram dexteramve, exārsit bellum Turcās inter et
Germānōs, in quō cum multa ēgregiē fēcisset, cecidit adversō
cōnfossus vulnere.
Alter, quī litterās in gymnasiō discēbat, ut causās in forō ageret,

saepe prīncipātum inter aequālēs in solitīs concertātiōnibus
obtinēbat. Nec parva erat parentum magistrōrumque dē juvene
exspectātiō ; sed cum forte in fēriīs septembrālibus corpore adhūc
calidō aquam frīgidam imprūdentius bibisset, in morbum incidit, et
intrā paucōs diēs exstīnctus est.
Jam nūllus supererat praeter minimum nātū, quī Crusoe

appellābātur. Itaque suam in eō spem omnem ambō parentēs
collocāvērunt, quippe quī ipsīs esset ūni [3]cus. Nihil eō cārius in
terrīs habēbant ; sed amor eōrum nōn erat rēctae ratiōnī
cōnsentāneus.
Cum enim dēbuissent certam eī vīvendī disciplīnam trādere,

multaque ūtilia simul et jūcunda eum docēre, quae ipsum ōlim
bonum et beātum effēcissent, omnia fīliolō indulsērunt ; quī cum
lūdere quam studēre māllet, tōtam illam aetātem ; quae bonīs artibus
vacāre poterat, in ōtiō et nūgīs cōnsūmpsit.
Pater optābat ut ille mercātūrae sē addīceret : quā quidem

proximē ab agricultūrā nihil melius, nihil frūctuōsius, nihil homine
līberō dignius. Hoc vērō minimē fīliō placuit ; sē mālle ait orbem
terrārum peragrāre, ut multās rēs novās audīre, multās vidēre
posset.
Jam annum aetātis decimum septimum attigerat, plūrimum vērō

temporis trīverat in ōtiō. Quotīdiē autem patrem urgēbat, ut ab ipsō
peregrīnandī licentiam impetrāret, quam ille nōlēbat concēdere.
[4]Quādam diē, cum mōre suō praeter portum cursitāret, incidit in
ūnum ex aequālibus, nāvarchī cujusdam fīlium, quī in eō erat ut cum
patre Londinium nāvigāret.
Interrogāvit eum sodālis an adjungere sē socium itineris vellet :

« Libenter, ait Crūsōeus ; vereor autem ut parentēs id mihi
concēdant. — Hui ! respondet alter, sine veniā proficīscendum est.
Post trēs hebdomadēs reducēs erimus : parentibus vērō nūntiandum
cūrābis, quōnam terrārum migrāveris. — Careō autem pecūniā, ait
Crūsōeus. — Nihil rēfert, alter excipit, siquidem hoc tibi cōnstābit
grātīs. »
Rōbinson noster, rē paululum dēlīberātā, īlicō manum cum

alterō jungēns, « Eugē, ō bone, exclāmat ! ībō tēcum ; sed cōnfestim
nāvem cōnscendāmus. » Tum mandat cuidam, ut hōrīs aliquot
ēlāpsīs patrem conveniat, moneatque fīlium, ad Angliam invīsendam
prōfectum, mox reditūrum esse. Quibus perāctīs, ambō sodālēs
nāvem cōnscendunt.
[5]
Nec multō post nautae solvunt ancorās, vēlaque ventō

intendunt. Nāvis agī incipit ; nāvarchusque, tribus explōsīs tormentīs
bellicīs, urbī valedīcit. Stābat Rōbinson in stegā, et vix
praeconceptam ex optātō diū itinere laetitiam capiēbat.
Caelum serēnum erat, ventusque adeō secundus, ut brevī

Hamburgum ē cōnspectū abeuntium sē subdūxerit. Posterā diē, jam
eō dēvēnerant ubi Albis in mare effluit, et nunc altum tenent. Quantā
vērō Rōbinson admīrātiōne stupuit, cum maris immēnsitātem
intuēns, suprā sē nihil praeter caelum, atque nihil ante, pōne, circā
sē nisi aquam cōnspexit !
Fuit per bīduum āēr serēnus, ventusque bellē flāvit

nāvigantibus ; tertiō autem diē caelum nūbibus tegī, ventusque
vehementior esse coepit. Ac prīmō fulgura ēmicant, quasi tōtum
flammīs caelum ārdēret. Deinde ingruunt tenebrae velutī in altissimā
nocte : tonitrua cum ingentī fragōre resonāre, imber dē caelō ruere
torrentī [6]similis, mare intumēscēns flūctūs ciēre. Nāvis modo ad
nūbēs tollī, modo praeceps ferrī in profundum. Quantus fūnium
strepitus ! quantus in nāvī tumultus ! quod nactus erat, quisque
complectēbātur, nē dējicerētur ipse.
Rōbinson, īnsuētus maris adulēscēns, cum jactātiōnem maris

ferre nōn posset, nauseā correptus est, et tam male sē habuit, ut
exspīrantī similis vidērētur.
« Heu ! parentēs optimī ! heu ! iterum iterumque exclāmāvit,

numquam vōs ego revīsam. »
« Bone Deus ! exclāmant nautae pallidī dēspērantēsque,

periimus ! abreptī sunt mālī, nāvis aquā undequāque complētur. »
Hīs audītīs, Rōbinson, quī in cubīlī nauticō sedēbat, membrīs
fluentibus, retrō collāpsus est. Cēterī ad antliās accurrere, ut nāvem,
sī fierī possit, suprā aquam retineant. Nāvarchus interim tormenta
iterum iterumque explōsit, ut nāvibus, sī quae forte nōn longē
abessent, si [7]gnifīcāret sē magnō in discrīmine versārī. Rōbinson,
quī hujus fragōris causam ignōrābat, ratus omnia periisse, dēnuō
exanimātus est.
Et jam prō sē quisque aquam exhaurīre ; sed in īnfimō nāvis

tabulātō crēscēbat aquae altitūdō.
Nihil praeter mortem erat in exspectātiōne. Prōjiciuntur quidem

ad nāvem sublevandam tormenta, dōlia, mercium sarcinae ; sed nihil
haec omnia prōficiunt.
Intereā nāvis alia, audītō sonitū tormentōrum, quae ad

significandum discrīmen explōsa fuērunt, scapham ēmīserat ad
servandōs saltem nāvigantēs ; sed aestus flūctuum obstābat,
quōminus accēderet. Attamen propius ita dēmum subiit, ut iīs, quī in
nāvī essent, fūnis prōjicerētur. Cujus ope scapha tandem attracta
est, et in eam quisque dēsiliit, ut salūtī cōnsuleret. Rōbinson, quī
jacēbat dēfūnctō similis, ā quibusdam nautīs, quōs adulēscentulī
miserēbat, in eamdem conjectus [8]est. Vix paululum ā nāvī
recesserant, cum illa ante oculōs flūctibus obruta est. Et nunc
fēlīcius contigit, ut tempestās paulātim sēdārētur : aliter cymba, tot
hominibus onerāta ipsa quoque flūctibus absorpta fuisset. Tandem,
post multa perīcula, pervēnit ad nāvem, quam omnēs exceptī sunt.
Nāvis illa Londinium tendēbat. Quattuor ēlāpsīs diēbus, ad

ōstium Tamesis pervēnit, quīntā vērō in portū jēcit ancorās. Mox
quisque in terram dēscendit, laetus quod ē perīculō ēvāsisset. Vix
Rōbinson pedem ē nāve extulerat, cum eum incessit cupīdō
vīsendae immēnsae urbis Londiniī. Quidquid erat in oculīs
spectantem ita dētinuit, ut praeteritī immemor dē futūrō quidem
minimē cūrāret. Tandem suus eum stomachus admonuit, Londiniī
haud secus ac alibī terrārum cibīs opus esse. Itaque adiit praefectum
ejus nāvis quae ipsum advēxerat, rogāvitque ut licēret ipsīus
mēnsae assidēre. Ille vērō li [9]benter juvenem excēpit ; atque inter
prandendum ab hospite quaerit, quō cōnsiliō et quid factūrus hūc
vēnerit ? Tum Rōbinson ingenuē professus est, sē animī recreandī
causā hoc iter suscēpisse, atque īnsciīs parentibus ; jam autem sē
esse omnīnō inopem. « Īnsciīs parentibus tuīs ? clāmat nauta
exterritus : bone Deus ! utinam hoc ego prius rescīvissem ! numquam
sānē ā mē impetrāssēs, ut ego tē in nāvem meam admitterem. »
Rōbinson, dēmissīs oculīs, vultūque rubōre suffūsō, siluit. Nec dēsiit
bonus nauta monēre adulēscentem, quam graviter peccāvisset,
addiditque illum numquam aliquā ex parte beātum esse posse,
dōnec ā suīs veniam ōrāvisset. Rōbinson commōtus multum flēvit :
« Sed quid agam nunc ? » rogat ille cum singultū.

(Download PDF) Business Finance 11th Edition Peirson Test Bank Full Chapter

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

(Download PDF) Business Finance 11th Edition Peirson Test Bank Full Chapter

Uploaded by

Copyright:

Available Formats

Business Finance 11th Edition Peirson

Personal Finance 11th Edition Garman Test Bank

Corporate Finance 11th Edition Ross Test Bank

Personal Finance 11th Edition Kapoor Test Bank

Principles of Corporate Finance 11th Edition Brealey

Multinational Business Finance 15th Edition Eiteman

Multinational Business Finance 12th Edition Stonehill

Multinational Business Finance 14th Edition Eiteman

Multinational Business Finance 13th Edition Eiteman

2. Variance is best defined as:

A. difference of opinion in expected returns.

4. Which investor attaches decreasing utility to each increment in wealth?

5. Which investor attaches equal utility to each increment in wealth?

8. Portfolio theory was initially developed by:

11. Which statement best describes the market portfolio?

A. Portfolio of all traded assets in the universe.

12. The capital market line:

A. describes the equilibrium risk-return relationship for efficient portfolios.

13. A security market line:

14. Examine the following probability distribution:

The expected value from this is:

The range and standard deviation of the distribution are:

A. $4000 and $1095.45, respectively.

16. Examine the following probability distribution:

The mean, range and standard deviation are:

A. 0.06, 0.10 and 0.0693, respectively.

A. investment distributions are not usually bell shaped.

A. Horizontal line above the x axis.

21. The benefit of diversification to an investor is the reduction of:

22. Which of the following statements is true?

23. Which of the following investments does a rational investor prefer?

A. Investment A: E(R) = 10%, = 3%

28. A risk-averse investor attaches:

A. increasing utility to each increment in wealth.

29. A risk-neutral investor attaches:

A. increasing utility to each increment in wealth.

A. increasing utility to each increment in wealth.

32. Risk aversion implies that:

33. Two important assumptions of portfolio theory are:

36. An ‘efficient' portfolio is one that:

A. combines assets whose returns are not perfectly correlated.

A. will increase the expected return of the portfolio.

38. The efficient frontier:

40. Systematic risk represents:

A. Changes in the level of interest rates.

43. Beta is a measure of the extent to which:

A. the returns on the stock market as a whole change over time.

A. E(R) = 0.152, σ = 0.161

A. security market line.

A. Consumer price index.

A. the best return from a high risk investment.

Has the portfolio:

A. underperformed relative to the benchmark.

Has the portfolio:

A. underperformed relative to the benchmark.

53. Which of the following is NOT a portfolio performance measure?

62. In order to benchmark the performance of a portfolio it is important to compare it to a portfolio of

72. Explain the difference between systematic and unsystematic risk.

Has the portfolio:

a. What is the expected return of ZIN?

2. Variance is best defined as:

A. difference of opinion in expected returns.

5. Which investor attaches equal utility to each increment in wealth?