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chap7_exercise
Course: FIN 367, Spring 2008School: University of Texas
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7 Chapter Selected Problems: From textbooks 1, P234 #1 2, P234 #7 3, P235 #10 4, P236 #19 Additional multiple choice questions: 1. According to the capital asset pricing model, a well-diversified portfolio's rate of return is a function of __________. A) market risk B) unsystematic risk C) unique risk D) reinvestment risk 2. According to the capital asset pricing model, a security with a __________. A) negative...
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7 Chapter Selected Problems: From textbooks
1, P234 #1 2, P234 #7 3, P235 #10 4, P236 #19
Additional multiple choice questions: 1. According to the capital asset pricing model, a well-diversified portfolio's rate of return is a function of __________. A) market risk B) unsystematic risk C) unique risk D) reinvestment risk
2. According to the capital asset pricing model, a security with a __________. A) negative alpha is considered a good buy B) positive alpha is considered overpriced C) positive alpha is considered underpriced D) zero alpha is considered a good buy
3. Stocks A, B, C and D have betas of 1.5, 0.4, 0.9 and 1.7 respectively. What is the beta of an equally weighted portfolio of A, B and C? A) .25 B) .93 C) 1.00 D) 1.13
4. Consider the CAPM. The risk-free rate is 6% and the expected return on market the is 18%. What is the expected return on a stock with a beta of 1.3? A) 6% B) 15.6% C) 18% D) 21.6%
5. According to the capital asset pricing model, the expected rate of return on any security is equal to __________. A) [(the risk-free rate) + (beta of the security)] x (market risk premium) B) (the risk-free rate) + [(variance of the security's return) x (market risk premium)] C) (the risk-free rate) + [(security's beta) x (market risk premium)] D) (market rate of return) + (the risk-free rate)
6. Security X has an expected rate of return of 13% and a beta of 1.15. The risk-free rate is 5% and the market expected rate of return is 15%. According to the capital asset pricing model, security X is __________. A) fairly priced B) overpriced C) underpriced D) None of the above answers are correct
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