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# chap07 - The difference between the expected return on the...

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Sheet1 Page 1 The difference between the expected return on the market and the risk-free rate is called: a. beta. b. the market rate. c. the market risk premium. d. none of the above. status: not answered () correct: c your answer: -------------------------------------------------------------------------------- 2 The expected return on Stock X is 15.75% while the risk-free rate of return is 7%. If the expected return on the market is 12% a. 1.90 b. 1.75 c. 1.60 d. 1.45 status: not answered () correct: b your answer: -------------------------------------------------------------------------------- 3 Use the following information concerning Airline X's stock returns to solve the next few problems. Outcome Probability Return Boom .2 .25 Normal .5 .15 Recession .3 .05 What is the expected return for Airline X? a. .15 b. .14 c. .13 d. .12 status: not answered () correct: b

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Sheet1 Page 2 your answer: -------------------------------------------------------------------------------- 4 Use the following information concerning Airline X's stock returns to solve the next few problems. Outcome Probability Return Boom .2 .25 Normal .5 .15 Recession .3 .05 What is the standard deviation of the return for Airline X? a. .0000 b. .0700 c. .0049 d. none of the above status: not answered () correct: b your answer: -------------------------------------------------------------------------------- 5 You have \$20,000 to invest and you decide to invest \$30,000 in a stock with an expected return of 16% and short \$10,000 i a. 18% b. 16% c. 14% d. 12% status: not answered () correct: a your answer: -------------------------------------------------------------------------------- 6 You have \$50,000 to invest and you decide to invest \$30,000 in a stock with a beta of 1.5 and \$20,000 in a stock with a bet a. 1.50 b. 1.40 c. 1.30 d. 1.20
Sheet1 Page 3 status: not answered () correct: c your answer: -------------------------------------------------------------------------------- 7 You have \$40,000 to invest and you decide to invest \$30,000 in a stock with an expected return of 12% and \$10,000 in a st a. 15% b. 14% c. 13% d. 12% status: not answered () correct: c your answer: -------------------------------------------------------------------------------- 8 The Capital Asset Pricing Model can be used to determine the expected return on: a. only stocks.

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