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Finance 534 week 5 quiz 4

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Question;Finance 534 week 5;quiz 4Finance 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?;Question 5;Which of the following statements is;CORRECT? (Assume that the risk-free rate is a constant.);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?;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.;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?;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.);Question 10;For a portfolio of 40 randomly selected;stocks, which of the following is most likely to be true?;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;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?;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;Question 15;Which of the following statements is;CORRECT?;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;Question 17;The preemptive right is important to;shareholders;because it;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%;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?;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%;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;Question 23;2 out of 2 points;Which of the following statements is;CORRECT?;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;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%;Question 26;2 out of 2 points;An increase in a firm?s expected growth rate;would cause its required rate of return to;Question 27;2 out of 2 points;If markets are in equilibrium, which of the;following conditions will exist?;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;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;Question 30;0 out of 2 points;Which of the following statements is;CORRECT, assuming stocks are in equilibrium?

 

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