Assume a Security Has No Unsystematic Risk

question 23

Multiple Choice

Assume a security has no unsystematic risk.Given this,the excess return on that security will be the highest if the factor,F,________ and the beta for that factor is ________.

• A)increases in value; high
• B)increases in value; low
• C)remains constant; zero
• D)decreases in value; high
• E)decreases in value; low

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Definitions:

Diminishing Marginal Utility

The economic principle stating that as a person increases consumption of a product, there is a decline in the additional satisfaction or utility that person derives from consuming one more unit of the product.

Increasing Opportunity Costs

The principle that the cost of forgoing the next best alternative increases as one allocates more resources to a certain activity.

Value Losses

Decreases in the worth or market value of an asset over time.

Cash Gift-Giving

The practice of giving money as a present to friends or family members on special occasions or celebrations.