投资学第7版testbank答案09.docx
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投资学第7版testbank答案09
MultipleChoiceQuestions
1.InthecontextoftheCapitalAssetPricingModel(CAPM)therelevantmeasureofriskis
A)uniquerisk.
B)beta.
C)standarddeviationofreturns.
D)varianceofreturns.
E)noneoftheabove.
Answer:
BDifficulty:
Easy
Rationale:
Once,aportfolioisdiversified,theonlyriskremainingissystematicrisk,whichismeasuredbybeta.
2.AccordingtotheCapitalAssetPricingModel(CAPM)awelldiversifiedportfolio'srateofreturnisafunctionof
A)marketrisk
B)unsystematicrisk
C)uniquerisk.
D)reinvestmentrisk.
E)noneoftheabove.
Answer:
ADifficulty:
Easy
Rationale:
Withadiversifiedportfolio,theonlyriskremainingismarket,orsystematic,risk.ThisistheonlyriskthatinfluencesreturnaccordingtotheCAPM.
3.Themarketportfoliohasabetaof
A)0.
B)1.
C)-1.
D).
E)noneoftheabove
Answer:
BDifficulty:
Easy
Rationale:
Bydefinition,thebetaofthemarketportfoliois1.
4.Therisk-freerateandtheexpectedmarketrateofreturnareand,respectively.Accordingtothecapitalassetpricingmodel(CAPM),theexpectedrateofreturnonsecurityXwithabetaofisequalto
A).
B).
C).
D)
E)
Answer:
DDifficulty:
Easy
Rationale:
E(R)=6%+(12-6)=%.
5.Therisk-freerateandtheexpectedmarketrateofreturnareand,respectively.Accordingtothecapitalassetpricingmodel(CAPM),theexpectedrateofreturnonasecuritywithabetaofisequalto
A)
B).
C).
D)
E)
Answer:
ADifficulty:
Easy
Rationale:
E(R)=%+-=%.
6.Whichstatementisnottrueregardingthemarketportfolio
A)Itincludesallpubliclytradedfinancialassets.
B)Itliesontheefficientfrontier.
C)Allsecuritiesinthemarketportfolioareheldinproportiontotheirmarketvalues.
D)Itisthetangencypointbetweenthecapitalmarketlineandtheindifferencecurve.
E)Alloftheabovearetrue.
Answer:
DDifficulty:
Moderate
Rationale:
Thetangencypointbetweenthecapitalmarketlineandtheindifferencecurveistheoptimalportfolioforaparticularinvestor.
7.WhichstatementisnottrueregardingtheCapitalMarketLine(CML)
A)TheCMListhelinefromtherisk-freeratethroughthemarketportfolio.
B)TheCMListhebestattainablecapitalallocationline.
C)TheCMLisalsocalledthesecuritymarketline.
D)TheCMLalwayshasapositiveslope.
E)TheriskmeasurefortheCMLisstandarddeviation.
Answer:
CDifficulty:
Moderate
Rationale:
BoththeCapitalMarketLineandtheSecurityMarketLinedepictrisk/returnrelationships.However,theriskmeasurefortheCMLisstandarddeviationandtheriskmeasurefortheSMLisbeta(thusCisnottrue;theotherstatementsaretrue).
8.Themarketrisk,beta,ofasecurityisequalto
A)thecovariancebetweenthesecurity'sreturnandthemarketreturndividedbythevarianceofthemarket'sreturns.
B)thecovariancebetweenthesecurityandmarketreturnsdividedbythestandarddeviationofthemarket'sreturns.
C)thevarianceofthesecurity'sreturnsdividedbythecovariancebetweenthesecurityandmarketreturns.
D)thevarianceofthesecurity'sreturnsdividedbythevarianceofthemarket'sreturns.
E)noneoftheabove.
Answer:
ADifficulty:
Moderate
Rationale:
Betaisameasureofhowasecurity'sreturncovarieswiththemarketreturns,normalizedbythemarketvariance.
9.AccordingtotheCapitalAssetPricingModel(CAPM),theexpectedrateofreturnonanysecurityisequalto
A)Rf+β[E(RM)].
B)Rf+β[E(RM)-Rf].
C)β[E(RM)-Rf].
D)E(RM)+Rf.
E)noneoftheabove.
Answer:
BDifficulty:
Moderate
Rationale:
Theexpectedrateofreturnonanysecurityisequaltotheriskfreerateplusthesystematicriskofthesecurity(beta)timesthemarketriskpremium,E(RM-Rf).
10.TheSecurityMarketLine(SML)is
A)thelinethatdescribestheexpectedreturn-betarelationshipforwell-diversifiedportfoliosonly.
B)alsocalledtheCapitalAllocationLine.
C)thelinethatistangenttotheefficientfrontierofallriskyassets.
D)thelinethatrepresentstheexpectedreturn-betarelationship.
E)thelinethatrepresentstherelationshipbetweenanindividualsecurity'sreturnandthemarket'sreturn.
Answer:
DDifficulty:
Moderate
Rationale:
TheSMLisameasureofexpectedreturnperunitofrisk,whereriskisdefinedasbeta(systematicrisk).
11.AccordingtotheCapitalAssetPricingModel(CAPM),fairlypricedsecurities
A)havepositivebetas.
B)havezeroalphas.
C)havenegativebetas.
D)havepositivealphas.
E)noneoftheabove.
Answer:
BDifficulty:
Moderate
Rationale:
Azeroalpharesultswhenthesecurityisinequilibrium(fairlypricedforthelevelofrisk).
12.AccordingtotheCapitalAssetPricingModel(CAPM),underpricedsecurities
A)havepositivebetas.
B)havezeroalphas.
C)havenegativebetas.
D)havepositivealphas.
E)noneoftheabove.
Answer:
DDifficulty:
Moderate
13.AccordingtotheCapitalAssetPricingModel(CAPM),overpricedsecurities
A)havepositivebetas.
B)havezeroalphas.
C)havenegativebetas.
D)havepositivealphas.
E)noneoftheabove.
Answer:
CDifficulty:
Moderate
Rationale:
Azeroalpharesultswhenthesecurityisinequilibrium(fairlypricedforthelevelofrisk).
14.AccordingtotheCapitalAssetPricingModel(CAPM),
A)asecuritywithapositivealphaisconsideredoverpriced.
B)asecuritywithazeroalphaisconsideredtobeagoodbuy.
C)asecuritywithanegativealphaisconsideredtobeagoodbuy.
D)asecuritywithapositivealphaisconsideredtobeunderpriced.
E)noneoftheabove.
Answer:
DDifficulty:
Moderate
Rationale:
Asecuritywithapositivealphaisonethatisexpectedtoyieldanabnormalpositiverateofreturn,basedontheperceivedriskofthesecurity,andthusisunderpriced.
15.AccordingtotheCapitalAssetPricingModel(CAPM),whichoneofthefollowingstatementsisfalse
A)Theexpectedrateofreturnonasecuritydecreasesindirectproportiontoadecreaseintherisk-freerate.
B)Theexpectedrateofreturnonasecurityincreasesasitsbetaincreases.
C)Afairlypricedsecurityhasanalphaofzero.
D)Inequilibrium,allsecuritieslieonthesecuritymarketline.
E)Alloftheabovestatementsaretrue.
Answer:
ADifficulty:
Moderate
Rationale:
StatementsB,C,andDaretrue,butstatementAisfalse.
16.Inawelldiversifiedportfolio
A)marketriskisnegligible.
B)systematicriskisnegligible.
C)unsystematicriskisnegligible.
D)nondiversifiableriskisnegligible.
E)noneoftheabove.
Answer:
CDifficulty:
Moderate
Rationale:
Market,orsystematic,ornondiversifiable,riskispresentinadiversifiedportfolio;theunsystematicriskhasbeeneliminated.
17.Empiricalresultsregardingbetasestimatedfromhistoricaldataindicatethat
A)betasareconstantovertime.
B)betasofallsecuritiesarealwaysgreaterthanone.
C)betasarealwaysnearzero.
D)betasappeartoregresstowardoneovertime.
E)betasarealwayspositive.
Answer:
DDifficulty:
Moderate
Rationale:
Betasvaryovertime,betasmaybenegativeorlessthanone,betasarenotalwaysnearzero;however,betasdoappeartoregresstowardoneovertime.
18.Yourpersonalopinionisthatasecurityhasanexpectedrateofreturnof.Ithasabetaof.Therisk-freerateisandthemarketexpectedrateofreturnis.AccordingtotheCapitalAssetPricingModel,thissecurityis
A)underpriced.
B)overpriced.
C)fairlypriced.
D)cannotbedeterminedfromdataprovided.
E)noneoftheabove.
Answer:
CDifficulty:
Moderate
Rationale:
11%=5%+(9%-5%)=%;therefore,thesecurityisfairlypriced.
19.Therisk-freerateis7percent.Theexpectedmarketrateofreturnis15percent.Ifyouexpectastockwithabetaoftoofferarateofreturnof12percent,youshould
A)buythestockbecauseitisoverpriced.
B)sellshortthestockbecauseitisoverpriced.
C)sellthestockshortbecauseitisunderpriced.
D)buythestockbecauseitisunderpriced.
E)noneoftheabove,asthestockisfairlypriced.
Answer:
BDifficulty:
Moderate
Rationale:
12%<7%+(15%-7%)=%;therefore,stockisoverpricedandshouldbeshorted.
20.Youinvest$600inasecuritywithabetaofand$400inanothersecuritywithabetaof.Thebetaoftheresultingportfoliois
A)
B)
C)
D)
E)
Answer:
DDifficulty:
Moderate
Rationale:
+=.
21.Asecurityhasanexpectedrateofreturnofandabetaof.Themarketexpectedrateofreturnisandtherisk-freerateis.Thealphaofthestockis
A)%.
B)%.
C)%.
D)%.
E)noneoftheabove.
Answer:
ADifficulty:
Moderate
Rationale:
10%-[5%+(8%-5%)]=%.
22.YouropinionisthatCSCOhasanexpectedrateofreturnof.Ithasabetaof.Therisk-freerateisandthemarketexpectedrateofreturnis.AccordingtotheCapitalAssetPricingModel,thissecurityis
A)underpriced.
B)overpriced.
C)fairlypriced.
D)cannotbedeterminedfromdataprovided.
E)noneoftheabove.
Answer:
BDifficulty:
Moderate
Rationale:
%-4%+%-4%)=%;therefore,thesecurityisoverpriced.
23.YouropinionisthatCSCOhasanexpectedrateofreturnof.Ithasabetaof.Therisk-freerateisandthemarketexpectedrateofreturnis.AccordingtotheCapitalAssetPricingModel,thissecurityis
A)underpriced.
B)overpriced.
C)fairlypriced.
D)cannotbedeterminedfromdataprovided.
E)none