Fin 825 Lecture Notes 9: Multifactor Models and Arbitrage Pricing Theory
Ming Li San Francisco State University Spring 2007
Main Points
The Multifactor Models The Arbitrage Pricing Theory Practical Use of the Multi-Factor Models Market Efficiency
1
Mult
Fin 825 Quiz 3 Solution, Fall 2006
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1. (CAPM) Given following information about two stocks A and B Stock Beta A 0.8 B 1.2 The Market Portfolio has an expected return of rM = 10% and the risk-free rate is r f = 5% . (1) Compute the expected returns of
Week10 Homework Assignment Solution BKM page 480
2. The effective annual yield on the semiannual coupon bonds is 8.16%. If the annual coupon bonds are to sell at par they must offer the same yield, which requires an annual coupon rate of 8.16%.
3.
The bon
Week7 Homework Assignment Solution
BKM: page 304-309 1. E(rP) = rf + P [E(rM ) rf ] 18 = 6 + P(14 6) P = 12/8 = 1.5 2. If the security's correlation coefficient with the market portfolio doubles (with all other variables such as variances unchanged), then