FINANCIAL ECONOMICS
[PROBLEM SET NO. 3]
Optimal Risky Portfolios
Multiple Choice Questions
1. Market risk is also referred to as
A. systematic risk, diversifiable risk.
B. systematic risk, nondiversifiable risk.
C. unique risk, nondiversifiable risk.
D. u
Chapter 1 - Investments: Background and Issues
Investment vs. investments
Real assets vs. financial assets
Financial markets and the economy
Investment process
Competitive markets
Players in investment markets
Recent trends
Investments as a profession
Inv
CHAPTER 01
INVESTMENTS: BACKGROUND AND ISSUES
1. Equity is a lower priority claim and represents an ownership share in a corporation,
whereas debt has a higher priority claim, but does not have an ownership interest. Debt
also pays a specified cash flow o
Chapter 2 - Asset Classes and Financial Instruments
CHAPTER 2: ASSET CLASSES AND FINANCIAL
INSTRUMENTS
PROBLEM SETS
1.
Preferred stock is like long-term debt in that it typically promises a fixed payment
each year. In this way, it is a perpetuity. Preferr
Chapter 1 The Investment Environment
Multiple Choice Questions
1. In 2005, _ was the most significant real asset of U. S. nonfinancial
businesses in terms of total value.
A) equipment and software
B) inventory
C) real estate
D) trade credit
E) marketable
ch18
Student: _
1.
_ is equal to the total market value of the firm's common stock divided by (the replacement cost of
the firm's assets less liabilities).
A. Book value per share
B. Liquidation value per share
C. Market value per share
D. Tobin's Q
E. No
Module 7
Asset pricing models
Prepared by Pamela Peterson Drake, Ph.D., CFA
1.
Overview
Asset pricing models are different ways of interpreting how investors value investments. Most
models are based on the idea that investors hold well-diversified portfol
Chapter 09 - The Capital Asset Pricing Model
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL
PROBLEM SETS 1. E(rP) = rf + P [E(rM ) rf ] 18 = 6 + P(14 6) P = 12/8 = 1.5 2. If the securitys correlation coefficient with the market portfolio doubles (with all oth
CHAPTER 10: ARBITRAGE PRICING THEORY AND MULTIFACTOR MODELS OF RISK AND RETURN
CHAPTER 10: ARBITRAGE PRICING THEORY AND MULTIFACTOR MODELS OF
RISK AND RETURN
PROBLEM SETS
1.
The revised estimate of the expected rate of return on the stock would be the old
CHAPTER 10: ARBITRAGE PRICING THEORY AND MULTIFACTOR MODELS OF RISK AND
RETURN
CHAPTER 10: ARBITRAGE PRICING THEORY AND
MULTIFACTOR MODELS OF RISK AND RETURN
PROBLEM SETS
1.
The revised estimate of the expected rate of return on the stock would be the old
Index Models
Chapter 10
The Need for a Simpler Model
the input list (i.e., list of assets on the market) in the Markovitz portfolio selection model is very important, determining the accuracy of finding efficient portfolios however, it involves a lot of c
Chapter 10 - Practice Questions 1. Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds. If the of your portfolio was 0.20 and M was 0.16, the of the portfolio would be approximately _
Econ435 Financial Markets and the Macroeconomy Fall 2005 Midterm
The exam consists of 40 multiple choice questions and one essay question. Please answer ALL of them. The duration of the exam is 1 hr 30 mins. DO NOT OPEN the exams until you are told to do
Foundations of Finance: The Capital Asset Pricing Model (CAPM)
Prof. Alex Shapiro
Lecture Notes 9
The Capital Asset Pricing Model (CAPM)
I. II. III. IV. V. VI. Readings and Suggested Practice Problems Introduction: from Assumptions to Implications The Mar
Chapter 9 - Practice Questions 1. According to the Capital Asset Pricing Model (CAPM) a well diversified portfolio's rate of return is a function of A) market risk B) unsystematic risk C) unique risk. D) reinvestment risk. E) none of the above. 2. Which s
The Capital Asset Pricing Model
Chapter 9
Capital Asset Pricing Model (CAPM)
centerpiece of modern finance gives the relationship that should be observed between risk and return of an asset it allows for the evaluation of:
future prices of stocks fair pri
BKM Chapter 9: The Capital Asset Pricing Model
Key Notation
Notation for the CAPM Extensions is listed within the notes for that section, because its
generally not used elsewhere and can be conflicting.
Key Formulas
CAPM Formulas
i = Cov(ri,RM)/ M2
E(ri)-
ch25
Student: _
1.
Shares of several foreign firms are traded in the U.S. markets in the form of
A. ADRs
B. ECUs
C. single-country funds
D. all of the above
E. none of the above
2.
_ refers to the possibility of expropriation of assets, changes in tax pol
ch26
Student: _
1.
_ are the dominant form of investing in securities markets for most individuals and _ have
enjoyed far greater growth rate in the last decade.
A. Hedge funds; hedge funds
B. Mutual funds; hedge funds
C. Hedge funds; mutual funds
D. Mutu
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL
PROBLEM SETS
1.
E (rP ) = rf + P [ E (rM ) rf ]
.18 = .06 + P [.14 .06] P =
2.
.12
= 1.5
.08
If the securitys correlation coefficient with the market portfolio doubles (
ch27
Student: _
1.
In the Treynor-Black model
A.portfolio weight are sensitive to large alpha values which can lead to infeasible long or short position for
many portfolio managers.
B portfolio weight are not sensitive to large alpha values which can lead
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL
PROBLEM SETS
1.
E (rP ) = rf + P [ E (rM ) rf ]
.18 = .06 + P [.14 .06] P =
2.
.12
= 1.5
.08
If the securitys correlation coefficient with the market portfolio doubles (
ch28
Student: _
1.
The CFA Institute divides the process of portfolio management into 3 main elements, which are _,
_, and _.
A. planning; execution; results
B. security selection; asset allocation; action
C. planning; asset allocation; feedback
D. planni
CHAPTER 9 THE CAPITAL ASSET PRICING MODEL
9 -1
Outline of the Chapter
CAPM
What is CAPM? Assumptions of CAPM Market Portfolio in CAPM CAPM equation Security Market Line
The Zero-Beta Model Labor Income Multiperiod Model A Consumption Based CAPM Liqui
Answer Key
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. A E C B E B D A B E A C B A A A B E C D D C B B D
Econ435 Financial Markets and the Macroeconomy Fall 2005 Final Exam
The exam consists of 60 multiple choice questions and one essay question. Please answer ALL of them. The duration of the exam is 2 hrs. DO NOT OPEN the exams until you are told to do so a
FINANCIAL
ECONOMICS
[PROBLEM SET NO. 5]
DEADLINE 10/04/91
1. In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of risk
is
A. unique risk.
B. beta.
C. standard deviation of returns.
D. variance of returns.
E. none of the above.
FINANCIAL ECONOMICS
[SOLUTION PROBLEM SET3]
Optimal Risky Portfolios
Multiple Choice Questions
1. Market risk is also referred to as
A. systematic risk, diversifiable risk.
B. systematic risk, nondiversifiable risk.
C. unique risk, nondiversifiable risk.