the economics of money, banking, and financial markets

144 #

© 2014 Pearson Canada Inc.#

5.6 Web Appendix 1: Models of Asset Pricing

1. 
   

   The riskiness of an asset is measured by ____.
   A) the magnitude of its return
   B) the absolute value of any change in the asset's price
   C) the standard deviation of its return
   D) risk is impossible to measure
   Answer: C
   Diff: 1 Type: MC Page Ref: 5A1- 2
   Topic: Questions for Web Appendix on Asset Pricing
   Skill: Recall
   Objective List: Appendix: Models of Asset Pricing

   
   


2. 
   

   Holding many risky assets and thus reducing the overall risk an investor faces is called
   ____.
   A) diversification
   B) foolishness
   C) risk acceptance
   D) capitalization
   Answer: A
   Diff: 1 Type: MC Page Ref: 5A1- 4
   Topic: Questions for Web Appendix on Asset Pricing
   Skill: Recall
   Objective List: Appendix: Models of Asset Pricing

   
   


3. 
   

   The ____ the returns on two securities move together, the ____ benefit there is from
   diversification.
   A) less; more
   B) less; less
   C) more; more
   D) more; greater
   Answer: A
   Diff: 1 Type: MC Page Ref: 5A1- 5
   Topic: Questions for Web Appendix on Asset Pricing
   Skill: Recall
   Objective List: Appendix: Models of Asset Pricing