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5. The risk that a firms stock price might be adversely affected by the U.S....

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Finance

5. The risk that a firms stock price might be adversely affected by the U.S. economic recession is an example of systematic risk.

a) True b) False

  1. Which of the following coupon bond carries the largest amount of interest rate risk?
    1. 5 year coupon bond
    2. 8 year coupon bond
    3. 10 year coupon bond
    4. 20 year coupon bond

  1. The yield to maturity for a bond selling at discount is:
  1. above the coupon rate
  2. below the coupon rate
  3. equal to the coupon rate
  4. none of the above are correct

  1. Assume that you currently hold one type of security and decide to construct a portfolio. Which of the following would provide the highest degree of risk reduction?
    1. adding a security that has perfect negative correlation with the one your are holding
    2. adding a security that has perfect positive correlation with the one your are holding
    3. adding a security that is uncorrelated with your current one
    4. adding a positively, but not perfectly correlated security.

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