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Homework_4_-_BUS321

# Homework_4_-_BUS321 - Homework#4 Due by 3:00pm*o0o Student...

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BUS321 - Homework #4 Page 1 Homework #4 Due: by 3:00pm, April 02, 2010 *****o0o****** Student name: ______________________________________________________ Without showing YOUR WORK for calculation questions, you have only ¼ credit!!!! 1. _________ 17. _________ 2. _________ 18. _________ 3. _________ 19. _________ 4. _________ 20. _________ 5. _________ 21. _________ 6. _________ 22. _________ 7. _________ 23. _________ 8. _________ 24. _________ 9. _________ 25. _________ 10. _________ 26. _________ 11. _________ 27. _________ 12. _________ 28. _________ 13. _________ 29. _________ 14. _________ 30. _________ 15. _________ 31. _________ 16. _________

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BUS321 - Homework #4 Page 2 1. Fama and French claim that after controlling for firm size and the ratio of firm's book value to market value, beta is ______________. I. highly significant in predicting future stock returns II. relatively useless in predicting future stock returns III. a good predictor of firm's specific risk A. I only B. II only C. I and III only D. I, II and III 2. Which of the following are assumptions of the simple CAPM model? I. Individual trades of investors do not affect a stock's price II. All investors plan for one identical holding period III. All investors analyze securities in the same way and share the same economic view of the world IV. All investors have the same level of risk aversion 3. Consider the CAPM. The risk-free rate is 5% and the expected return on the market is 15%. What is the beta on a stock with an expected return of 17%? 4. If enough investors decide to purchase stocks they are likely to drive up stock prices thereby causing _____________ and ___________. 5. If all investors become more risk averse the SML will _______________ and stock prices will _______________. A. shift upward; rise B. shift downward; fall C. have the same intercept with a steeper slope; fall D. have the same intercept with a flatter slope; rise
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Homework_4_-_BUS321 - Homework#4 Due by 3:00pm*o0o Student...

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