Homework Answers
| Capital Asset Pricing Model (CAPM) indicates what should be expected or required return on risky assets. | ||||||
| As per CAPM, only Systematic risk is relevant to the determination of expected return on assets. | ||||||
| Unsystematic risk is negligible | ||||||
| Hence, while using capital asst pricing model (CAPM), investors are compensated based on : | ||||||
| I. Market risk premium | ||||||
| II. Risk-free rate | ||||||
| III.Portfolio beta | ||||||
| Option : 5 ) I, II and III only | ||||||
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Based on the capital asset pricing model, investors are compensated based on which of the following?...
The capital asset pricing model: applies to portfolios but not too individual securities. rewards investors based...
The capital asset pricing model: applies to portfolios but not too individual securities. rewards investors based on total risk assumed considers the relationship between the fluctuations in a security's returns versus the market's returns assumes the market has a beta of zero and the risk-free rate is positive. assumes the market risk premium is constant over time.
Which one of the following statement about the capital asset pricing model is correct 1) assumes...
Which one of the following statement about the capital asset pricing model is correct 1) assumes the market has a beta of zero. 2) rewards investors based on systematic risk. 3) applies to portfolios but not to individual securities. 4) rewards investors based on unsystematic risk.
3. The basics of the Capital Asset Pricing Model Aa Aa which of the following are...
3. The basics of the Capital Asset Pricing Model Aa Aa which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply Investors have identical estimates of expected retums but not of variances. Investors can borrow an unlimited amount at a risk-free rate Investors assume that their investment activities won't affect the price of a stock. All investors are price givers. Consider the equation for the Capital Asset Pricing Model (CAPM): Cov(, M) In...
3. The basics of the Capital Asset Pricing Model Which of the following are assumptions of...
3. The basics of the Capital Asset Pricing Model Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply. Expected returns are based on individual investor risk sensitivity. Investors have homogeneous expectations. There are no taxes. All investors focus on a single holding period. Consider the equation for the Capital Asset Pricing Model (CAPM): = TRF + OM-TRF) x Cover o In this equation, the term (OM-TRF) represents the Suppose that the market's...
Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that...
Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply.Investors assume that their investment activities won't affect the price of a stock.There are no taxes.Assets won't be short sold.Asset quantities aren't given.Consider the equation for the Capital Asset Pricing Model (CAPM):$$ \hat{r}_{1}=r_{R F}+\left(\hat{r}_{M}-r_{R F}\right) \times \frac{\operatorname{Cov}\left(r_{i}, r_{M}\right)}{\sigma_{M}^{2}} $$In this equation, the term \(r_{R F}\) represents therate of return on a risk-free bondSuppose that the market's average excess return on stocks is 6.00 %...
Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that...
Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply. O Asset quantities are given and fixed. There are no transaction costs. Taxes are accounted for. All investors focus on a single holding period. O Consider the equation for the Capital Asset Pricing Model (CAPM): Cov(ri, rm) ři = rre + Cím – PRF) x In this equation, the term Cov(ri, rm) / om represents the Suppose that the market's average excess return...
Question 4 (a) Describe the Capital Asset Pricing Model (CAPM). (4 marks, maximum 200 words) (b)...
Question 4 (a) Describe the Capital Asset Pricing Model (CAPM). (4 marks, maximum 200 words) (b) Using the CAPM derive the required annual rate of return on the market portfolio given the following information: • The current rate of return on treasury bills is 3.5%. • The required annual rate of return on a security with a beta of 1.5 is 12.2%. (2 marks) (c) Distinguish between i. Systematic, and ii. Unsystematic risk (4 marks, maximum 200 words) Total for...
A stock has a beta of 0.8. Using the Capital Asset Pricing Model what is the...
A stock has a beta of 0.8. Using the Capital Asset Pricing Model what is the expected return of the stock if the risk-free rate is 4% and the expected risk premium on the market is 8%?
please answer 3. The basics of the Capital Asset Pricing Model Aa Aa Which of the...
please answer
3. The basics of the Capital Asset Pricing Model Aa Aa Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply. All investors focus on a single holding period All assets are perfectly divisible and liquid. Asset quantities are given and fixed. Standard deviation is the same for all assets Consider the equation for the Capital Asset Pricing Model (CAPM): Cov(ri, rM) 2 In this equation, the term Cov(n, m.) /...
Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to f...
Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to find the required return. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Risk-free rate, RF 10% Market return, om 15% Beta, b 0.5 The required return for the asset is % (Round to two decimal places.)
The capital asset pricing model: applies to portfolios but not too individual securities. rewards investors based on total risk assumed considers the relationship between the fluctuations in a security's returns versus the market's returns assumes the market has a beta of zero and the risk-free rate is positive. assumes the market risk premium is constant over time.
3. The basics of the Capital Asset Pricing Model Aa Aa which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply Investors have identical estimates of expected retums but not of variances. Investors can borrow an unlimited amount at a risk-free rate Investors assume that their investment activities won't affect the price of a stock. All investors are price givers. Consider the equation for the Capital Asset Pricing Model (CAPM): Cov(, M) In...
3. The basics of the Capital Asset Pricing Model Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply. Expected returns are based on individual investor risk sensitivity. Investors have homogeneous expectations. There are no taxes. All investors focus on a single holding period. Consider the equation for the Capital Asset Pricing Model (CAPM): = TRF + OM-TRF) x Cover o In this equation, the term (OM-TRF) represents the Suppose that the market's...
Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply. O Asset quantities are given and fixed. There are no transaction costs. Taxes are accounted for. All investors focus on a single holding period. O Consider the equation for the Capital Asset Pricing Model (CAPM): Cov(ri, rm) ři = rre + Cím – PRF) x In this equation, the term Cov(ri, rm) / om represents the Suppose that the market's average excess return...
please answer
3. The basics of the Capital Asset Pricing Model Aa Aa Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply. All investors focus on a single holding period All assets are perfectly divisible and liquid. Asset quantities are given and fixed. Standard deviation is the same for all assets Consider the equation for the Capital Asset Pricing Model (CAPM): Cov(ri, rM) 2 In this equation, the term Cov(n, m.) /...
Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to find the required return. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Risk-free rate, RF 10% Market return, om 15% Beta, b 0.5 The required return for the asset is % (Round to two decimal places.)
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