Question :
11.A particular asset has a beta of 1.2 and an : 1404064
11.A particular asset has a beta of 1.2 and an expected return of 10%. The expected return on the market portfolio is 13% and the risk-free is 5%. The stock is
a.overpriced
b.underpriced
c.appropriately priced
d.Cannot tell from the given information
12.An asset has a beta of 2.0 and an expected return of 20%. The expected risk premium on the market portfolio is 5% and the risk-free is 7%. The stock is
a.overpriced
b.underpriced
c.appropriately priced
d.Cannot tell from the given information
13.A stock that pays no dividends is currently priced at $40 and is expected to increase in price to $45 by year end. The expected risk premium on the market portfolio is 6% and the risk-free is 5%. If the stock has a beta of 0.6, the stock is
a.overpriced
b.underpriced
c.appropriately priced
d.Cannot tell from the given information
14.A particular stock has a beta of 1.4 and an expected return of 13%. If the expected risk premium on the market portfolio is 6%, what’s the expected return on the market portfolio?
a.10.6%
b.4.6%
c.8.4%
d.9.3%
15.A particular stock has an expected return of 18%. If the expected return on the market portfolio is 13%, and the risk-free rate is 5%, what’s the stock’s CAPM beta?
a.1.000
b.1.625
c.2.250
d.1.385
16.A particular stock has an expected return of 11%. If the expected risk premium on the market portfolio is 8%, and the risk-free rate is 5%, what’s the stock’s CAPM beta?
a.1.375
b.0.750
c.0.846
d.0.462
17.The stock of Alpha Company has an expected return of 15.5% and a beta of 1.5, and Gamma Company stock has an expected return of 13.4% and a beta of 1.2. Assume the CAPM holds. What’s the expected return on the market?
a.12%
b.7%
c.10.3%
d.11.2%
18.The stock of Alpha Company has an expected return of 18% and a beta of 1.5, and Gamma Company stock has an expected return of 15.6% and a beta of 1.2. Assume the CAPM holds. What’s the risk-free rate?
a.8.0%
b.6.0%
c.0%
d.4.7%
18% = Rf +1.5(Rm-Rf)
15.6% = Rf +1.2(Rm-Rf)
19.The CAPM (capital asset pricing model) assumes that:
a.all assets can be traded
b.investors are risk-averse
c.investors have homogeneous expectations
d.all of the above
20.A portfolio has 40% invested in Asset 1 and 60% invested in Asset 2. If Asset 1 has a beta of 1.2 and Asset 2 has a beta of 1.8, what’s the beta of the portfolio?
a.1.50
b.1.56
c.1.20
d.1.80
e.cannot tell from the given information
