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strayer fin534 quiz 4

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Question;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;Correct Answer;Question 2;Assume;that the risk-free rate is 5%. Which of;the following statements is CORRECT?;Correct Answer;Question 3;Which;of the following statements is;CORRECT?;Correct Answer:.;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;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?;Correct Answer;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;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?;Correct Answer;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

 

Paper#49850 | Written in 18-Jul-2015

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