True or false: CAPM predicts that, in equilibrium, every asset will have the same ratio of...
Homework Answers
False. This is because every asset has different beta. Hence the ratio of risk premium to total risk is higher. As per CAPM the ratio will be different due to different betas
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True or false: CAPM predicts that, in equilibrium, every asset
will have the same ratio of...
true or false: the risk premium for every asset is positive.
true or false: the risk premium for every asset is positive.
QUESTION 15 "In the CAPM, the average asset will have a Beta of 1" True False
QUESTION 15 "In the CAPM, the average asset will have a Beta of 1" True False
Under the CAPM, an asset with a lower standard deviation than the market can never have a β less than −1. True or false...
Under the CAPM, an asset with a lower standard deviation than the market can never have a β less than −1. True or false?
10-15 true or false for each statement 0 0 10. In the CAPM, stocks with larger...
10-15
true or false for each statement
0 0 10. In the CAPM, stocks with larger betas will have lower expected returns. 0 0 11. The SML intersects the risk axis when drawn. 12. The market risk premium would not be the same for high-beta and low-beta 0 0 stocks. 0 0 13. Systematic risk and nondiversifiable risk are synonymous. 0 0 14. Correlations can only be positive. 0 0 15. When two states of the economy are equal and...
Asset A has a CAPM beta of 1.5. The covariance between asset A and asset B is 0.13. If the risk-free rate is 0.05, the expected market risk premium is 0.07, and the market risk premium has a standard...
Asset A has a CAPM beta of 1.5. The covariance between asset A and asset B is 0.13. If the risk-free rate is 0.05, the expected market risk premium is 0.07, and the market risk premium has a standard deviation of 25%, then what is asset B's expected return under the CAPM?
Asset A has a CAPM beta of 1.5. The covariance between asset A and asset B is 0.13. If the risk-free rate is 0.05, the expected market risk...
Assume all assets are correctly priced in CAPM equilibrium. Assets X and Y have the same...
Assume all assets are correctly priced in CAPM equilibrium. Assets X and Y have the same CAPM beta, but X has much more unique risk than Y. E(rX) > E(rY) because X has more unique risk. It is possible E(rX) < E(rY) because unique risk is diversified away. Correlation of X with the market = correlation of Y with the market. Correlation of X with the market > Correlation of Y with the market. None of the above.
Resonance and equilibrium are the same. True False
Resonance and equilibrium are the same. True False
a) If the CAPM is correct, what would be the expected return of a risky asset...
a) If the CAPM is correct, what would be the expected return of a risky asset with a beta of 1.2, given a risk free rate of 3% and an expected market risk premium of 4.5%? b) If the CAPM is correct, what would be the expected return of a risky asset with a beta of 0.8, given a risk free rate of 4% and an expected return of the market of 9%
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, beca...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (rrF) is 4.67% while the market risk premium is 5.75%. The Allen Company has a beta of 1.56. Using the capital asset pricing model (CAPM) approach, Allen's...
If the CAPM assumptions are true, then it follows that all investors hold the same portfolio. Is this statement true or...
If the CAPM assumptions are true, then it follows that all investors hold the same portfolio. Is this statement true or false? Explain why your answer makes sense.
QUESTION 15 "In the CAPM, the average asset will have a Beta of 1" True False
10-15
true or false for each statement
0 0 10. In the CAPM, stocks with larger betas will have lower expected returns. 0 0 11. The SML intersects the risk axis when drawn. 12. The market risk premium would not be the same for high-beta and low-beta 0 0 stocks. 0 0 13. Systematic risk and nondiversifiable risk are synonymous. 0 0 14. Correlations can only be positive. 0 0 15. When two states of the economy are equal and...
Asset A has a CAPM beta of 1.5. The covariance between asset A and asset B is 0.13. If the risk-free rate is 0.05, the expected market risk premium is 0.07, and the market risk premium has a standard deviation of 25%, then what is asset B's expected return under the CAPM?
Asset A has a CAPM beta of 1.5. The covariance between asset A and asset B is 0.13. If the risk-free rate is 0.05, the expected market risk...
Resonance and equilibrium are the same. True False
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (rrF) is 4.67% while the market risk premium is 5.75%. The Allen Company has a beta of 1.56. Using the capital asset pricing model (CAPM) approach, Allen's...
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