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##### Finance 534 week 5 quiz 4

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Question;Question 10 out of 2 points;Which of the following statements;is CORRECT?;Answer;Question 22 out of 2;points;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?;Answer;Question 30 out of 2;points;Which of the following is most;likely to occur as you add randomly selected stocks to your portfolio, which;currently consists of 3 average stocks?;Answer;Question 42 out of 2;points;Which of the following statements;is CORRECT?;Answer;Question 52 out of 2;points;Your portfolio consists of $50,000;invested in Stock X and $50,000 invested in Stock Y. Both stocks have;an expected return of 15%, betas of 1.6, and standard deviations of;30%. The returns of the two stocks are independent, so the correlation;coefficient between them, rXY, is zero. Which of the;following statements best describes the characteristics of your 2-stock;portfolio?;Answer;Question 62 out of 2;points;Which of the following statements;is;CORRECT?;Answer;Question 72 out of 2;points;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?;Answer;Question 82 out of 2;points;Which of the following is NOT;a potential problem when estimating and using betas, i.e., which statement is;FALSE?;Answer;Question 92 out of 2;points;Stock X has a beta of 0.5 and;Stock Y has a beta of 1.5. Which of the following statements must;be true, according to the CAPM?;Answer;Question 102 out of 2;points;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?;Answer;Question 112 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.;Answer;Question 122 out of 2;points;Which of the following statements;is CORRECT?;Answer;Question 130 out of 2;points;Stock A has an expected return of;12%, a beta of 1.2, and a standard deviation of 20%. Stock B also has a;beta of 1.2, but its expected return is 10% and its standard deviation is;15%. Portfolio AB has $900,000 invested in Stock A and $300,000;invested in Stock B. The correlation between the two stocks' returns is;zero (that is, rA,B = 0). Which of the following statements;is CORRECT?;Answer;Question 142 out of 2;points;Which of the following statements;is CORRECT?;Answer;Question 152 out of 2;points;Assume that the risk-free rate is;5%. Which of the following statements is CORRECT?;Answer;Question 162 out of 2;points;An increase in a firm?s expected;growth rate would cause its required rate of return to;Answer;Question 172 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;Question 180 out of 2;points;A stock is expected to pay a year-end dividend;of $2.00, i.e., D1 = $2.00. The dividend is expected to;decline at a rate of 5% a year forever (g = -5%). If the company is in;equilibrium and its expected and required rate of return is 15%, which of the;following statements is CORRECT?;Answer;Question 192 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;Price;$25;$40;Expected;growth;7%;9%;Expected;return;10%;12%;Answer;Question 202 out of 2;points;The preemptive right is important;to shareholders;because it;Answer;Question 210 out of 2;points;Which of the following statements;is CORRECT?;Answer;Question 222 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;Answer;Question 232 out of 2;points;Which of the following statements;is CORRECT?;Answer;Question 242 out of 2;points;If markets are in equilibrium;which of the following conditions will exist?;Answer;Question 252 out of 2;points;If a stock?s dividend is expected;to grow at a constant rate of 5% a year, which of the following statements is;CORRECT? The stock is in equilibrium.;Answer;Question 262 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;Question 272 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%;Answer;Question 282 out of 2;points;Companies can issue different;classes of common stock. Which of the following statements concerning;stock classes is CORRECT?;Answer;Question 292 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;$30;$30;Expected growth;(constant);6%;4%;Required;return;12%;10%;Answer;Question 302 out of 2;points;Which of the following statements;is CORRECT?;Answer

Paper#51521 | Written in 18-Jul-2015

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