For
more course tutorials visit
Finance 534 week 5 quiz 4
Question 1
Assume
that in recent years both expected inflation and the market risk premium (rM
− rRF) have declined. Assume also that all stocks have positive
betas. Which of the following would be
most likely to have occurred as a result of these changes?
Answer
Question 2
Assume
that the risk-free rate is 5%. Which of
the following statements is CORRECT?
Question 3
Which
of the following statements is
CORRECT?
Question 4
A
highly risk-averse investor is considering adding one additional stock to a 3-stock
portfolio, to form a 4-stock portfolio.
The three stocks currently held all have b = 1.0, and they are perfectly
positively correlated with the market.
Potential new Stocks A and B both have expected returns of 15%, are in
equilibrium, and are equally correlated with the market, with r = 0.75. However, Stock A's standard deviation of
returns is 12% versus 8% for Stock B.
Which stock should this investor add to his or her portfolio, or does
the choice not matter?
Correct Answer:
Question 5
Which
of the following statements is CORRECT?
(Assume that the risk-free rate is a constant.)
Correct Answer:
Question 6
During
the coming year, the market risk premium (rM − rRF), is expected to fall, while
the risk-free rate, rRF, is expected to remain the same. Given this forecast, which of the following
statements is CORRECT?
Correct Answer:
Question 7
2 out of 2 points
Stock
A's beta is 1.5 and Stock B's beta is 0.5.
Which of the following statements must be true, assuming the CAPM is
correct.
Correct Answer:
Question 8
Bob
has a $50,000 stock portfolio with a beta of 1.2, an expected return of 10.8%,
and a standard deviation of 25%. Becky
also has a $50,000 portfolio, but it has a beta of 0.8, an expected return of
9.2%, and a standard deviation that is also 25%. The correlation coefficient, r, between Bob's
and Becky's portfolios is zero. If Bob
and Becky marry and combine their portfolios, which of the following best
describes their combined $100,000 portfolio?
Correct Answer:
Question 9
Stock
A's beta is 1.5 and Stock B's beta is 0.5.
Which of the following statements must be true about these
securities? (Assume market equilibrium.)
Correct Answer:
The expected return on Stock A
should be greater than that on B.
Question 10
For
a portfolio of 40 randomly selected stocks, which of the following is most
likely to be true?
Correct Answer:
Question 11
Which
of the following statements is CORRECT?
Question 12
You
have the following data on three stocks:
Stock Standard Deviation Beta
A 20% 0.59
B 10% 0.61
C 12% 1.29
If you are a strict risk
minimizer, you would choose Stock ____ if it is to be held in isolation and
Stock ____ if it is to be held as part of a well-diversified portfolio.
Answer
Correct Answer:
Question 13
2 out of 2 points
Stock
A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of
1.2. Portfolio P has equal amounts
invested in each of the three stocks.
Each of the stocks has a standard deviation of 25%. The returns on the three stocks are
independent of one another (i.e., the correlation coefficients all equal
zero). Assume that there is an increase
in the market risk premium, but the risk-free rate remains unchanged. Which of the following statements is CORRECT?
Correct Answer:
Question 14
Which
is the best measure of risk for a single asset held in isolation, and which is
the best measure for an asset held in a diversified portfolio?
Answer
Correct Answer:
Question 15
Which
of the following statements is CORRECT?
Correct Answer:
Question 16
If
in the opinion of a given investor a stock’s expected return exceeds
its required return, this
suggests that the investor thinks
Answer
Correct Answer:
Question 17
The
preemptive right is important to shareholders
because it
Correct Answer:
Question 18
2 out of 2 points
Stocks
X and Y have the following data.
Assuming the stock market is efficient and the stocks are in
equilibrium, which of the following statements is CORRECT?
X Y
Price
$25 $25
Expected dividend yield 5% 3%
Required return 12% 10%
Correct Answer:
Stock X pays a higher dividend
per share than Stock Y.
Question 19
2 out of 2 points
Companies
can issue different classes of common stock.
Which of the following statements concerning stock classes is CORRECT?
Question 20
The
required returns of Stocks X and Y are rX = 10% and rY
= 12%. Which of the following statements is CORRECT?
Correct Answer:
Question 21
Stocks
A and B have the following data.
Assuming the stock market is efficient and the stocks are in
equilibrium, which of the following statements is CORRECT?
A B
Price
$25 $40
Expected growth 7% 9%
Expected return 10% 12%
Correct Answer:
Question 22
Stocks
X and Y have the following data.
Assuming the stock market is efficient and the stocks are in
equilibrium, which of
the following statements is
CORRECT?
X Y
Price
$30 $30
Expected growth (constant) 6% 4%
Required return 12% 10%
Answer
Correct Answer:
Question 23
2 out of 2 points
Which
of the following statements is CORRECT?
Correct Answer:
Question 24
2 out of 2 points
Stocks
A and B have the same price and are in equilibrium, but Stock A has the higher
required rate of return. Which of the
following statements is CORRECT?
Answer
Correct Answer:
Question 25
0 out of 2 points
Stocks
A and B have the following data.
Assuming
the stock market is efficient and
the stocks are in equilibrium, which of the following statements is CORRECT?
A B
Required return 10% 12%
Market price $25 $40
Expected growth 7% 9%
Correct Answer:
For
more course tutorials visit
Finance 534 week 5 quiz 4
Question 1
Assume
that in recent years both expected inflation and the market risk premium (rM
− rRF) have declined. Assume also that all stocks have positive
betas. Which of the following would be
most likely to have occurred as a result of these changes?
Answer
Question 2
Assume
that the risk-free rate is 5%. Which of
the following statements is CORRECT?
Question 3
Which
of the following statements is
CORRECT?
Question 4
A
highly risk-averse investor is considering adding one additional stock to a 3-stock
portfolio, to form a 4-stock portfolio.
The three stocks currently held all have b = 1.0, and they are perfectly
positively correlated with the market.
Potential new Stocks A and B both have expected returns of 15%, are in
equilibrium, and are equally correlated with the market, with r = 0.75. However, Stock A's standard deviation of
returns is 12% versus 8% for Stock B.
Which stock should this investor add to his or her portfolio, or does
the choice not matter?
Correct Answer:
Question 5
Which
of the following statements is CORRECT?
(Assume that the risk-free rate is a constant.)
Correct Answer:
Question 6
During
the coming year, the market risk premium (rM − rRF), is expected to fall, while
the risk-free rate, rRF, is expected to remain the same. Given this forecast, which of the following
statements is CORRECT?
Correct Answer:
Question 7
2 out of 2 points
Stock
A's beta is 1.5 and Stock B's beta is 0.5.
Which of the following statements must be true, assuming the CAPM is
correct.
Correct Answer:
Question 8
Bob
has a $50,000 stock portfolio with a beta of 1.2, an expected return of 10.8%,
and a standard deviation of 25%. Becky
also has a $50,000 portfolio, but it has a beta of 0.8, an expected return of
9.2%, and a standard deviation that is also 25%. The correlation coefficient, r, between Bob's
and Becky's portfolios is zero. If Bob
and Becky marry and combine their portfolios, which of the following best
describes their combined $100,000 portfolio?
Correct Answer:
Question 9
Stock
A's beta is 1.5 and Stock B's beta is 0.5.
Which of the following statements must be true about these
securities? (Assume market equilibrium.)
Correct Answer:
The expected return on Stock A
should be greater than that on B.
Question 10
For
a portfolio of 40 randomly selected stocks, which of the following is most
likely to be true?
Correct Answer:
Question 11
Which
of the following statements is CORRECT?
Question 12
You
have the following data on three stocks:
Stock Standard Deviation Beta
A 20% 0.59
B 10% 0.61
C 12% 1.29
If you are a strict risk
minimizer, you would choose Stock ____ if it is to be held in isolation and
Stock ____ if it is to be held as part of a well-diversified portfolio.
Answer
Correct Answer:
Question 13
2 out of 2 points
Stock
A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of
1.2. Portfolio P has equal amounts
invested in each of the three stocks.
Each of the stocks has a standard deviation of 25%. The returns on the three stocks are
independent of one another (i.e., the correlation coefficients all equal
zero). Assume that there is an increase
in the market risk premium, but the risk-free rate remains unchanged. Which of the following statements is CORRECT?
Correct Answer:
Question 14
Which
is the best measure of risk for a single asset held in isolation, and which is
the best measure for an asset held in a diversified portfolio?
Answer
Correct Answer:
Question 15
Which
of the following statements is CORRECT?
Correct Answer:
Question 16
If
in the opinion of a given investor a stock’s expected return exceeds
its required return, this
suggests that the investor thinks
Answer
Correct Answer:
Question 17
The
preemptive right is important to shareholders
because it
Correct Answer:
Question 18
2 out of 2 points
Stocks
X and Y have the following data.
Assuming the stock market is efficient and the stocks are in
equilibrium, which of the following statements is CORRECT?
X Y
Price
$25 $25
Expected dividend yield 5% 3%
Required return 12% 10%
Correct Answer:
Stock X pays a higher dividend
per share than Stock Y.
Question 19
2 out of 2 points
Companies
can issue different classes of common stock.
Which of the following statements concerning stock classes is CORRECT?
Question 20
The
required returns of Stocks X and Y are rX = 10% and rY
= 12%. Which of the following statements is CORRECT?
Correct Answer:
Question 21
Stocks
A and B have the following data.
Assuming the stock market is efficient and the stocks are in
equilibrium, which of the following statements is CORRECT?
A B
Price
$25 $40
Expected growth 7% 9%
Expected return 10% 12%
Correct Answer:
Question 22
Stocks
X and Y have the following data.
Assuming the stock market is efficient and the stocks are in
equilibrium, which of
the following statements is
CORRECT?
X Y
Price
$30 $30
Expected growth (constant) 6% 4%
Required return 12% 10%
Answer
Correct Answer:
Question 23
2 out of 2 points
Which
of the following statements is CORRECT?
Correct Answer:
Question 24
2 out of 2 points
Stocks
A and B have the same price and are in equilibrium, but Stock A has the higher
required rate of return. Which of the
following statements is CORRECT?
Answer
Correct Answer:
Question 25
0 out of 2 points
Stocks
A and B have the following data.
Assuming
the stock market is efficient and
the stocks are in equilibrium, which of the following statements is CORRECT?
A B
Required return 10% 12%
Market price $25 $40
Expected growth 7% 9%
Correct Answer:
Question 26
2 out of 2 points
An
increase in a firm’s expected growth rate would cause its required rate of
return to
Correct Answer:
Question 27
2 out of 2 points
If
markets are in equilibrium, which of the following conditions will exist?
Answer
Correct Answer:
Question 28
0 out of 2 points
Two
constant growth stocks are in equilibrium, have the same price, and have the
same required rate of return. Which of
the following statements is CORRECT?
Answer
Correct Answer:
Question 29
2 out of 2 points
For
a stock to be in equilibrium, that is, for there to be no long-term pressure
for its price to depart from its current level, then
Correct Answer:
Question 30
0 out of 2 points
Which
of the following statements is CORRECT, assuming stocks are in equilibrium?
Correct Answer:
Question 26
2 out of 2 points
An
increase in a firm’s expected growth rate would cause its required rate of
return to
Correct Answer:
Question 27
2 out of 2 points
If
markets are in equilibrium, which of the following conditions will exist?
Answer
Correct Answer:
Question 28
0 out of 2 points
Two
constant growth stocks are in equilibrium, have the same price, and have the
same required rate of return. Which of
the following statements is CORRECT?
Answer
Correct Answer:
Question 29
2 out of 2 points
For
a stock to be in equilibrium, that is, for there to be no long-term pressure
for its price to depart from its current level, then
Correct Answer:
Question 30
0 out of 2 points
Which
of the following statements is CORRECT, assuming stocks are in equilibrium?
Correct Answer:
No comments:
Post a Comment