Topic: CAPM
61.
Assume that a security is fairly priced and has an expected rate of return of 0.17. The
market expected rate of return is 0.11 and the risk-free rate is 0.04. The beta of the stock
is
Topic: CAPM
62.
The amount that an investor allocates to the market portfolio is negatively related to
I) the expected return on the market portfolio.
II) the investor’s risk aversion coefficient.
III) the risk-free rate of return.
IV) the variance of the market portfolio.
M
63.
One of the assumptions of the CAPM is that investors exhibit myopic behavior. What does
this mean?
64.
The CAPM applies to
65.
Which of the following statements about the mutual fund theorem is true?
I) It is similar to the separation property.
II) It implies that a passive investment strategy can be efficient.
III) It implies that efficient portfolios can be formed only through active strategies.
IV) It means that professional managers have superior security selection strategies.
66.
The expected return-beta relationship of the CAPM is graphically represented by
67.
A “fairly priced” asset lies
68.
For the CAPM that examines illiquidity premiums, if there is correlation among assets due
to common systematic risk factors, the illiquidity premium on asset i is a function of
69.
Your opinion is that security A has an expected rate of return of 0.145. It has a beta of 1.5.
The risk-free rate is 0.04 and the market expected rate of return is 0.11. According to the
Capital Asset Pricing Model, this security is
70.
Your opinion is that security C has an expected rate of return of 0.106. It has a beta of 1.1.
The risk-free rate is 0.04 and the market expected rate of return is 0.10. According to the
Capital Asset Pricing Model, this security is
71.
The risk-free rate is 4%. The expected market rate of return is 12%. If you expect stock X
with a beta of 1.0 to offer a rate of return of 10%, you should
72.
The risk-free rate is 5%. The expected market rate of return is 11%. If you expect stock X
with a beta of 2.1 to offer a rate of return of 15%, you should
73.
You invest 50% of your money in security A with a beta of 1.6 and the rest of your money
in security B with a beta of 0.7. The beta of the resulting portfolio is
74.
You invest $200 in security A with a beta of 1.4 and $800 in security B with a beta of 0.3.
The beta of the resulting portfolio is
75.
Security A has an expected rate of return of 0.10 and a beta of 1.3. The market expected
rate of return is 0.10 and the risk-free rate is 0.04. The alpha of the stock is
76.
A security has an expected rate of return of 0.15 and a beta of 1.25. The market expected
rate of return is 0.10 and the risk-free rate is 0.04. The alpha of the stock is
77.
A security has an expected rate of return of 0.13 and a beta of 2.1. The market expected
rate of return is 0.09 and the risk-free rate is 0.045. The alpha of the stock is
9-77
78.
Assume that a security is fairly priced and has an expected rate of return of 0.13. The
market expected rate of return is 0.13 and the risk-free rate is 0.04. The beta of the stock
is
Short Answer Questions
79.
Discuss the differences between the capital market line and the security market line.
80.
Discuss the assumptions of the capital asset pricing model and how these assumptions
relate to the “real world” investment decision process.
81.
Discuss the mutual fund theorem.
82.
Discuss how the CAPM might be used in capital budgeting decisions and utility rate
decisions.
83.
List and discuss two of the assumptions of the CAPM.