sample_final_3710

sample_final_3710 - FIN 3710 Investment Analysis Prof: Lin...

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FIN 3710 Zicklin School of Business Investment Analysis Baruch College Prof: Lin Peng FIN 3710 Sample Final Exam NAME: ______________________________ (Please print your name here) PLEDGE: ____________________________ (Sign your name here) Instructions: 1. First things first, print and sign your name, on the seat assignment sheet, and the exam. 2. The exam has a total of 36 multiple-choice questions. It will count for 45% of your final course grade. 3. Please fill in your answers in the table next page with a Pen. Any grade discrepancies will not be considered if you use a pencil. 4. The exam is closed book and closed notes. You can bring in one page, 8 × 11 handwritten formula sheet. You will be given the exam only after your formula sheet is checked . You have a total of 120 minutes for the exam. 5. Do not separate the exam book. Turn in the entire exam together with the seat assignment sheet at the end. 6. Budgeting your time efficiently.
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1 2 3 4 5 B A C A C 6 7 8 9 10 B B D C B 11 12 13 14 15 B B A C C 16 17 18 19 20 B B D B D 21 22 23 24 25 B A D B C 26 27 28 29 30 B D D B C 31 32 33 34 35 B A A C A 36 B 1. Which of the following statements about the security market line (SML) is not true? a. The SML provides a benchmark for evaluating expected investment performance. b. The SML leads all investors to invest in the same portfolio of risky assets. c. The SML is a graphic representation of the relationship between expected return and beta. d. Properly valued assets plot exactly on the SML. 2. Market risk premium is 8%, risk free rate is 3%, security x and y have beta of 1.25 and 0.6, what is the expected return of each one based on CAPM? (Ch7, slide 10) a. 13%, 7.8% b. 7.8%, 13% c. 9%, 10% d. 5%, 9% 3. Continue from question 2, what’s beta of a portfolio with 40% in x and rest in y? (Ch7, slide 10) a. 0.6 b. 1.25 c. 0.86 d. NONE OF THE ABOVE 4. Suppose a security with b = 1.25 is offering expected return of 15%, mkt risk premium is 8% and r f is 3%. According to CAPM, the security is ______ (Ch7, slide 12) a. undervalued b. overvalued c. fairly valued, d. none of the above
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5. What’s the beta of a portfolio with expected return of 20%, and E(r M )=15% and r f =5% a. 0.47. b. 0.21. c. 1.5. d. 3.36. 6. The market price of a security is $40. Its expected return is 13%. r f is 7%, and the market risk premium is 8%. What will the market price of the security be if its beta doubles (and all other variables remain unchanged). Assume the stock is expected to pay a constant dividend in perpetuity. (HM5, ch7) a. 20.0 b. 27.4 c. 30.2 d. 35.1 7. If CAPM is valid, which of the situations below are possible? (HM5, ch7) a. Portfolio Expected return beta A 20% 1.4 B 25% 1.2 b. Portfolio
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sample_final_3710 - FIN 3710 Investment Analysis Prof: Lin...

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