In a Macro-Economic Based Risk Factor Model the Following Factor

question 25

Multiple Choice

In a macro-economic based risk factor model the following factor would be one of many appropriate factors:

• A) Confidence risk.
• B) Maturity risk.
• C) Expected inflation risk.
• D) Call risk.
• E) Return difference between small capitalization and large capitalization stocks.

Calculate the expected return of portfolios and understand the role of beta in portfolio management.

Understand the concepts of the expected rate of return and how to calculate it for individual stocks and portfolios.

Grasp the basics and application of the Capital Asset Pricing Model (CAPM).

Familiarize with the calculation and implications of a stock’s beta in portfolio management.

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Definitions:

Fewer Downloads

A situation indicating a decrease in the number of times digital content is downloaded by users, possibly reflecting changes in preference or accessibility.

Inferior Good

A type of good for which demand decreases as the income of the consumers increases, opposed to a normal good where demand increases with rising income.

Frozen Pizzas

Pre-made pizzas that are sold frozen to consumers, who then bake or heat them at home. They are a convenient, quick meal option that varies in quality and ingredients.

Substitutes

Goods or services that can be used in place of each other, where the increase in the price of one leads to an increase in the demand for another.