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    Risk and Return: Learning Goals

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    Kristel Sumabat
    This document summarizes Chapter 5 of the textbook, which covers the topics of risk and return. It includes 5 learning goals related to understanding risk, return, and risk preferences; measuring risk of single assets and returns of portfolios; the impact of diversification and international assets on portfolios; the two types of risk and the role of beta in measuring risk; and the capital asset pricing model and how it relates to the security market line. It then provides 10 true/false questions to test understanding of the chapter concepts.

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    Risk and Return: Learning Goals

    Uploaded by

    Kristel Sumabat
    17 views2 pages
    This document summarizes Chapter 5 of the textbook, which covers the topics of risk and return. It includes 5 learning goals related to understanding risk, return, and risk preferences; measuring risk of single assets and returns of portfolios; the impact of diversification and international assets on portfolios; the two types of risk and the role of beta in measuring risk; and the capital asset pricing model and how it relates to the security market line. It then provides 10 true/false questions to test understanding of the chapter concepts.

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    05-Risk-and-Return

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    This document summarizes Chapter 5 of the textbook, which covers the topics of risk and return. It includes 5 learning goals related to understanding risk, return, and risk preferences; measuring risk of single assets and returns of portfolios; the impact of diversification and international assets on portfolios; the two types of risk and the role of beta in measuring risk; and the capital asset pricing model and how it relates to the security market line. It then provides 10 true/false questions to test understanding of the chapter concepts.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    17 views2 pages

    Risk and Return: Learning Goals

    Uploaded by

    Kristel Sumabat
    This document summarizes Chapter 5 of the textbook, which covers the topics of risk and return. It includes 5 learning goals related to understanding risk, return, and risk preferences; measuring risk of single assets and returns of portfolios; the impact of diversification and international assets on portfolios; the two types of risk and the role of beta in measuring risk; and the capital asset pricing model and how it relates to the security market line. It then provides 10 true/false questions to test understanding of the chapter concepts.

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    Chapter 5

    Risk and Return

     Learning Goals
    1. Understand the meaning and fundamentals of risk, return, and risk preferences.

    2. Describe procedures for assessing and measuring the risk of a single asset.

    3. Discuss the measurement of return and standard deviation for a portfolio and the concept
    of correlation.

    4. Understand the risk and return characteristics of a portfolio in terms of correlation


    and diversification, and the impact of international assets on a portfolio.

    5. Review the two types of risk and the derivation and role of beta in measuring the relevant risk
    of both a security and a portfolio.

    6. Explain the capital asset pricing model (CAPM) and its relationship to the security market
    line (SML), and the major forces causing shifts in the SML.

     True/False
    1. For the risk-seeking manager, no change in return would be required for an increase in
    risk. Answer: FALSE
    Level of Difficulty: 1
    Learning Goal: 1
    Topic: Fundamentals of Risk and Return

    2. For the risk-averse manager, the required return decreases for an increase in
    risk. Answer: FALSE
    Level of Difficulty: 1
    Learning Goal: 1
    Topic: Fundamentals of Risk and Return

    3. For the risk-indifferent manager, no change in return would be required for an increase in
    risk. Answer: TRUE
    Level of Difficulty: 1
    Learning Goal: 1
    Topic: Fundamentals of Risk and Return
    212 Gitman • Principles of Finance, Eleventh Edition

    4. Most managers are risk-averse, since for a given increase in risk they require an increase in
    return. Answer: TRUE
    Level of Difficulty: 1
    Learning Goal: 1
    Topic: Fundamentals of Risk and Return

    5. The return on an asset is the change in its value plus any cash distribution over a given period
    of time, expressed as a percentage of its ending value.
    Answer: FALSE
    Level of Difficulty: 2
    Learning Goal: 1
    Topic: Measuring Single Asset Return

    6. For the risk-averse manager, the required return decreases for an increase in
    risk. Answer: FALSE
    Level of Difficulty: 2
    Learning Goal: 1
    Topic: Fundamentals of Risk and Return

    7. An investment that guarantees its holder $100 return and another investment that earns $0 or
    $200 with equal chances (i.e., an average of $100) over the same period have equal risk.
    Answer: FALSE
    Level of Difficulty: 2
    Learning Goal: 1
    Topic: Fundamentals of Risk and Return

    8. The real utility of the coefficient of variation is in comparing assets that have equal expected
    returns. Answer: FALSE
    Level of Difficulty: 1
    Learning Goal: 2
    Topic: Coefficient of Variation

    9. The risk of an asset may be found by subtracting the worst outcome from the best
    outcome. Answer: TRUE
    Level of Difficulty: 1
    Learning Goal: 2
    Topic: Measuring Single Asset Risk

    10. The larger the difference between an asset’s worst outcome from its best outcome, the higher
    the risk of the asset.
    Answer: TRUE
    Level of Difficulty:
    1 Learning Goal: 2
    Topic: Measuring Single Asset Risk

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