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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