Reading 37- LOS e ～ Q 1－3

1.Expected returns beyond required returns are referred to as an asset’s:

A)   beta.

B)   alpha.

C)   supernormal return.

D)   ex ante returns.

The correct answer was  B)

Alpha returns are returns beyond the required return expected on an asset given its level of risk.

2.An asset’s alpha returns are returns earned in addition to the asset’s:

A)   ex ante returns.

B)   required returns.

C)   projected returns.

D)   past returns.

The correct answer was  B)

Alpha returns are returns beyond the required return expected on an asset given its level of risk.

3.The difference between a holding period return on an asset and the return on similar assets is called an asset’s:

A)   ex ante alpha return.

B)   supernormal return.

C)   ex post alpha return.

D)   required return.

The correct answer was  C)

Ex post alpha returns are equal to the holding period return on the asset less the return earned on assets of similar risk.