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77. A stock's risk premium is equal to the:
78. Investing borrowed funds in a stock portfolio will generally:
79. What will happen to a stock that offers a lower return than predicted by the CAPM?
80. Which one of these statements is correct?
81. What happens to the expected portfolio return if the portfolio beta increases from 1.0 to
1.5, the risk-free rate decreases from 5 to 4%, and the market risk premium increases from 8 to
9%?
82. What would you recommend to an investor who is considering an investment that,
according to its beta, plots below the security market line?
83. Investment projects that plot above the security market line would be considered to
have:
84. The company cost of capital may be an inappropriate discount rate for a capital
budgeting proposal if:
85. A proposed investment must earn at least as much as the ______ if it is to be deemed
acceptable.
86. A project with higher than average risk offers an expected return of 14%. Which
statement is correct if the company's opportunity cost of capital is 12% and the project's
opportunity cost of capital is 15%?
87. The project cost of capital is:
88. The minimum acceptable expected rate of return on a project of a specific risk is the:
89. If changing discount rates from the company cost of capital to the project cost of capital
changes NPV from negative to positive, then the project should use the:
90. Which one of the following statements best explains the fact that cyclical firms tend to
have high betas?
91. What type of risk is properly reflected in a project's discount rate?
92. Assume last month a stock with a beta of 1.0 lost 2% while the S&P 500 had a 1% gain.
Given this it is most likely that the:
93. The slope of the regression line that exhibits the past relationship between a stock's
returns and the market's returns is the:
94. Which one of the following is most likely correct for a diversified stock portfolio that
exhibits a higher standard deviation than the market index?
95. An investor divides her portfolio into thirds, with one part in Treasury bills, one part in a
market index, and one part in a diversified portfolio with beta of 1.50. What is the beta of the
investor's overall portfolio?
96. If the market portfolio is expected to return 16%, then a portfolio that is expected to
return 13%:
97. The basic tenet of the CAPM is that a stock's expected risk premium should be:
98. If the company cost of capital is 20% and a proposed project's cost of capital is 15%, then
discounting the projects' cash flows at 20% would:
99. Based on the period 1926-2013, value stocks have:
100. Which one of the following adjustment techniques would be preferred to account for
additional project risk?
101. The correct opportunity cost for a project is determined to be 15% and the project is
expected to generate $1 million in cash flows at the end of the next 4 years after an initial outlay
of $3 million. Based on this information, the project would plot:
102. An investor prefers to invest in companies that have high fixed costs. How can this be
accomplished if the investor also requires a portfolio beta of 1.0?
103. Which one of the following portfolios might be expected to exhibit less unique risk?
104. If the plotting of a portfolio's returns against returns on the market index produces a tight
pattern, then the portfolio:
105. If an investor's portfolio is allocated 75% to the market portfolio and 25% to Treasury
bills, then the investor should expect to receive:
