Positive relationship between risk and return

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Reference no: EM131925181

1. Which of the following statements about risk is CORRECT?

a.Investors are risk averse, which means they would prefer bonds to sotcks because the former is less risky than the latter.

b. Apple Inc.'s stock has a smaller return volatility than that of Nvidia Inc., and but this does not necessarily mean that Apple shareholders should expect a lower return thatn Nvidia shareholders.

c. Apple Inc.'s stock has a lower beta than that of Nvidia Inc., and hence the former is a better investment choice for most investors.

d. A small investor is investing in 5 stock, and he should care only about the market risk of these securities.

2. Which of the following statements is NOT CORRECT?

a. Investors expect higher return by taking greater risk; here risk means market risk.

b. Any change in the 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.

c. The capital Asset Pricing Model/SML dictates a positive relationship between risk and return.

d. The slope and intercept of this Security Market Line can be influenced by a manager's actions.

Reference no: EM131925181

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