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##### finance homework mcq eco282

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Question;25. Beta of;Treasury bills is: a. +1.0 b. +0.5 c. -1.0 D. 026. Beta of the market portfolio is:a. Zero b. +0.5 c. -1.0 D.;+1.0 27. The;capital asset pricing model (CAPM) states that: A. The expected risk premium on an investment is;proportional to its beta b. The;expected rate of return on an investment is proportional to its beta c. The;expected rate of return on an investment depends on the risk-free rate and the;market rate of return d. The;expected rate of return on an investment is dependent on the risk-free rate 28. The;graphical representation of CAPM (Capital Asset Pricing Model) is called: a. Capital;Market Line b. Characteristic;Line C. Security Market Lined. None of;the above 29. Beta;measure indicates: a. The;ability to diversify risk B. The change in the rate of return on an investment for a;given change in the market returnc. The;actual return on an asset d. A and C 62 Junjie Liu ? Econ 282 Practice;Multiple Choice30. The;security market line (SML) is the graph of: a. Expected;rate on investment (Y-axis) vs. variance of return b. Expected;return on investment vs. standard deviation of return C. Expected rate of;return on investment vs. beta d. A and B 31. If the;beta of Microsoft is 1.13, risk-free rate is 3% and the market risk premium is;8%, calculate the expected return for Microsoft. A. 12.04% b. 15.66% c. 13.94% d. 8.65% 32. If the;beta of Amazon.com is 2.2, risk-free rate is 5.5% and the market risk premium;is 8%, calculate the expected rate of return for Amazon.com stock: a. 15.8% B. 14.3%c. 35.2% d. 23.1% 33. If the;beta of Exxon Mobil is 0.65, risk-free rate is 4% and the market rate of return;is 14%, calculate the expected rate of return from Exxon: a. 12.6% B. 10.5%c. 13.1% d. 6.5% 34. A stock;with a beta of zero would be expected to: a. Have a;rate of return equal to zero b. Have a;rate of return equal to the market risk premium C. Have a rate of return equal;to the risk-free rate d. Have a;rate of return equal to the market rate of return 35. A stock;with a beta of 1. 25 would be expected to: A. Increase in returns 25% faster than the market in up;markets b. Increase;in returns 25% faster than the market in down markets c. Increase;in returns 125% faster than the market in up markets d. Increase;in returns 125% faster than the market in down markets 36. If the;market risk premium is (rm - rf) is 8%, then according to the CAPM, the risk;premium of a stock with beta value of 1.7 must be: a. Less than;12% b. 12% C. Greater than 12%d. Cannot be determined63 Junjie Liu ? Econ 282 Practice;Multiple Choice37. The main;shortcoming of CAPM is that it a. Ignores;the return on the market portfolio b. Uses too;many factors C. Requires a single risk measure of systematic riskd. Ignores risk-free rate of return 38. If a stock;is overpriced it would plot: a. Above the;security market line B. Below the security market line c. On the;security market line d. On the;Y-axis 39. If a stock;is underpriced it would plot: A. Above the security market line b. Below the;security market line c. On the;security market line d. On the;Y-axis 40. Given the;following data for a stock: beta = 1.5, risk-free rate = 4%, market rate of;return = 12%, and Expected rate of return on the stock = 15%. Then the stock;is: A. Overpriced b. Underpriced;c. Correctly;priced d. Cannot be;determined 41. Given the;following data for a stock: beta = 0.5, risk-free rate = 4%, market rate of;return = 12%, and Expected rate of return on the stock = 10%. Then the stock;is: a. Overpriced;B. Under pricedc. Correctly;priced d. Cannot be;determined 42. Given the;following data for a stock: beta = 0.9, risk-free rate = 4%, market rate of;return = 14%, and Expected rate of return on the stock = 13%. Then the stock;is: a. Overpriced;b. Under;priced C. Correctly pricedd. Cannot be;determined 43. A;factor" in APT is a variable that: a. Is pure;noise" b. Correlates;with risky asset returns in an unsystematic manner C. Affects the return of;risky assets in a systematic manner d. Affects;the return of a risky asset in a random manner 64 Junjie Liu ? Econ 282 Practice;Multiple Choice44. Given the;following data for a stock: risk-free rate = 4%, factor-1 beta = 1.5, factor-2;beta = 0.5 factor-1 risk-premium = 8%, factor-2 risk-premium = 2%. Calculate;the expected rate of return on the stock using the two-factor APT model. a. 13% B. 17% c. 10% d. None of the above 45. The three;factors in the Three-Factor Model are: I) Market factor II) Size factor III);Book-to-market factor a. I only b. I and II only C. I, II, and III d. III only 46. Given the;following data for the a stock: risk-free rate = 5%, beta (market) = 1.5, beta;(size) = 0.3, beta (book-to-market) = 1.1, market risk premium = 7%, size risk;premium = 3.7%, and book-to-market risk premium = 5.2%. Calculate the expected;return on the stock using the Fama-French three-factor model. A. 22.3% b. 7.8% c. 11.5% d. None of the above 47. Given the;following data for the a stock: risk-free rate = 5%, beta (market) = 1.4, beta;(size) = 0.4, beta (book-to-market) = -1.1, market risk premium = 7%, size risk;premium = 3.7%, and book-to-market risk premium = 5.2%. Calculate the expected;return on the stock using the Fama-French three-factor model. a. 22.3% b. 7.8% C. 10.6% d. None of the above 65;="msonormal">

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