Question

Risk that is common to all assets (e.g., common stocks) of a certain type is referred to as

	systematic risk.
	unsystematic risk.
	idiosyncratic risk.
	structural risk.

In an efficient market with rational expectations, the actual price of an asset

Question 28 options:

	will equal its expected price.
	will often be below its expected price.
	will often be above its expected price.
	equals its expected price plus a random error term.

The efficient markets hypothesis

	assumes that market participants form their expectations adaptively.
	applies rational expectations to the pricing of assets.
	applies to the stock market, but not to the bond market.
	indicates that the stock market is efficient, but not rational.

In recent decades, the United States

	was essentially a closed economy.
	was generally a net borrower of foreign funds.
	was generally a net lender abroad.
	experienced a net outflow of savings.

Ms. Smith has 45% of her money in the stock of Green Corp. and the remainder of her money in Blue Corp. Based on historical data, the standard deviation for Green Corp. stock is 30% and the standard deviation for Blue Corp. is 15%. Security analysts estimate the correlation between Green and Blue as 0.55. What is the standard deviation of Ms. Smith's portfolio?

	0.112
	0.175
	0.037
	0.193

An open economy is one that

	has a large government sector.
	lends and borrows in the international capital market.
	produces mainly agricultural goods.
	produces mainly manufactured goods.

The world real interest rate is

	set annually by a special commission at the United Nations.
	set annually by a special commission at the International Monetary Fund.
	determined in the international capital market.
	determined daily on the New York Stock Exchange.

A small open economy

	is unable to affect the world real interest rate by its borrowing and lending decisions.
	will always be a net borrower from abroad.
	will always be a net lender abroad.
	is almost never able to borrow abroad.