Question :
41.If a stock were overpriced, it would plot:
A. above the security : 1409435
41.If a stock were overpriced, it would plot:
A. above the security market line.
B. below the security market line.
C. on the security market line.
D. on the Y-axis.
42.If a stock were underpriced, it would plot:
A. above the security market line.
B. below the security market line.
C. on the security market line.
D. on the Y-axis.
43.Assume the following data for a stock: Beta = 1.5; Risk-free rate = 4%; Market rate of return = 12%; and Expected rate of return on the stock = 15%. Then the stock is:
A. overpriced.
B. underpriced.
C. correctly priced.
D. cannot be determined.
44.Assume the following data for a stock: Beta = 0.5; Risk-free rate = 4%; Market rate of return = 12%; and Expected rate of return on the stock = 10%. Then the stock is:
A. overpriced.
B. underpriced.
C. correctly priced.
D. cannot be determined.
45.Assume the following data for a stock: Beta = 0.9; Risk-free rate = 4%; Market rate of return = 14%; and Expected rate of return on the stock = 13%. Then the stock is:
A. overpriced.
B. underpriced.
C. correctly priced.
D. cannot be determined.
46.A factor in APT is a variable that:
A. is pure "noise".
B. correlates with risky asset returns in an unsystematic manner.
C. correlates with the returns of risky assets in a systematic manner.
D. affects the returns of risky assets in a random manner.
47.Assume the following data for a stock: Risk-free rate = 4%; Factor-1 beta = 1.5; Factor-2 beta = 0.5; Factor-1 risk-premium = 8%; Factor-2 risk-premium = 2%. Calculate the expected rate of return on the stock using a two-factor APT model.
A. 14%
B. 17%
C. 10%
D. 13%
48.Which of the following is included in the Fama-French Three-Factor Model?
I) market factor;
II) liquidity factor;
III) book-to-market factor;
IV) size factor
A. I and II only
B. I, II, and IV
C. I, II, and III
D. I, III, and IV
49.Assume the following data for a stock: Risk-free rate = 5%; Beta (market) = 1.5; Beta (size) = 0.3; Beta (book-to-market) = 1.1; Market risk premium = 7%; Size risk premium = 3.7%; and Book-to-market risk premium = 5.2%. Calculate the expected return on the stock using the Fama-French three-factor model.
A. 22.3%
B. 7.8%
C. 11.5%
D. 20.9%
50.Assume the following data for a stock: Risk-free rate = 5%; Beta (market) = 1.4; Beta (size) = 0.4; Beta (book-to-market) = -1.1; Market risk premium = 7%; Size risk premium = 3.7%; and book-to-market risk premium = 5.2%. Calculate the expected return on the stock using the Fama-French three-factor model.
A. 22.3%
B. 7.8%
C. 10.6%
D. 20.9%
51.How can an investor earn more than the return generated by the tangency portfolio and still stay on the security market line?
A. Borrow at the risk-free rate and invest in the tangency portfolio.
B. Add high risk/return assets to the portfolio.
C. Adjust the weight of stock in the portfolio to include fewer high-return stocks.
D. It cannot be done.
52.For a company like the aluminum manufacturer Alcoa, what is the most likely factor when developing an arbitrage pricing model?
A. returns on the S&P 500 index
B. commodity price of aluminum
C. GDP
D. inflation
