BM 410 HW#16
Multiple Choice
1) Holding all else constant, a higher price implies a _________ expected return.
A)
lower
B) higher
C) more accurate
D) none of the above
2) The aggregation assumption of the CAPM
(assumption 1) allows us to
A) Conclude that the Rinvestor is “happy”
B)
Lump all investors into one big investor called the “representative investor".
C) Consider everyone has having different forecasts of returns, variances and covariances.
D) Assume the Rinvestor holds the tangency portfolio.
3) The preferences assumption (assumption 2) of the CAPM says that
A) The Rinvestor has a variety of objectives when choosing portfolio weights.
B)
The Rinvestor only cares about maximizing his Sharpe ratio.
C) The Rinvestor always prefers stocks with lower volatility.
D) The Rinvestor only cares about maximizing expected return.
4) The supply=demand assumption (assumption 3) of the CAPM says that
A) The Rinvestor holds the value weighted portfolio of all assets in the economy only if the
economy is in equilibrium.
B)
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 Fall '10
 BrianBoyer
 Capital Asset Pricing Model, representative, Modern portfolio theory, representative investor

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