Ch07 - Capital Asset Pricing and Arbitrage Pricing Theory...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Capital Asset Pricing and Arbitrage Pricing Theory 1. An adjusted beta will be ______ than the unadjusted beta. a. lower b. higher c. closer to 1 d. closer to 0 2. Fama and French claim that after controlling for firm size and the ratio of book value to market value, beta is insignificant in explaining stock returns. This claim is supported by ______. a. their analysis of stock return data b. a strong theory and impeccable logic c. all economists
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
d. all of the above 3. An index fund's demand curve for shares of stock is ______. a. very elastic b. very sensitive to changes in expected returns c. very inelastic d. none of the above 4. An index fund that holds the market portfolio will need to rebalance its portfolio when _______. a. prices change b. expected returns change
Background image of page 2
c. a stock split occurs d. none of the above 5. 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 6. Consider the CAPM. The risk-free rate is 6% and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3? a. 6%
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
b. 15.6% c. 18% d. 21.6% 7. 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 12%? a. .5 b. .7 c. 1.2 d. 1.4 8. Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.2 is 20%. What is the risk-free rate?
Background image of page 4
a. 2% b. 6% c. 8% d. 12% 9. The arbitrage pricing theory was developed by __________. a. Kenneth Blawatt b. Stephen Ross c. William Sharpe d. Berndt Sigloch
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
10. In the context of the capital asset pricing model, the systematic measure of risk is __________. a. unique risk b. beta c. standard deviation of returns d. variance of returns 11. Empirical results estimated from historical data indicate that betas __________. a. are always close to zero b. are constant over time c. of all securities are always greater than one d.
Background image of page 6
seem to regress toward one over time 12. __________ is a true statement regarding the multi-factor arbitrage pricing theory. a. Only the stock beta affects the stock price b. Only the stock unique risk affects the stock price c. Only the stock variance and beta affect the stock price d. Several systematic factors affect the stock price 13. The market portfolio has a beta of __________. a. -1.0 b. 0 c. 0.5
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
d. 1.0 14. In a well diversified portfolio, __________ risk is negligible. a. nondiversifiable b. market c. systematic d. unsystematic 15. The capital asset pricing model was developed by __________. a. Kenneth Blawatt b. Stephen Ross
Background image of page 8
c. William Sharpe d. Berndt Sigloch 16. According to the capital asset pricing model, a well-diversified portfolio's rate of return is a function of __________. a.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/22/2012 for the course FINA 3480 taught by Professor Moore during the Spring '11 term at Toledo.

Page1 / 40

Ch07 - Capital Asset Pricing and Arbitrage Pricing Theory...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online