Homework Answers
Option 1 is correct
Strong form, Semi-Strong form, Weak Form
Strong form EMH is a subset of semi-strong form which is sub set of weak form market efficiency.
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Chapter 08 Practice Test Question 05 Forms of Market Efficiency in the following Venn diagram of...
Chapter 14 Practice Test Question 08 ROE A firm has net income of $28 million, assets...
Chapter 14 Practice Test Question 08 ROE A firm has net income of $28 million, assets of $228 million and liabilities of $65 million. What is the firm's ROE? points Skipped Multiple Choice eBook Print References Oo oo 16.71% 17.18% Chapter 14 Practice Test Question 09 ROE and ROA XYZ firm has EBIT of $26 and assets of $260. The firm's debt carries an interest rate of 4% and the firm has $1.30 of debt for every dollar of equity....
Chapter 07 Practice Test Question 06 Alpha and the CAPM A stock with a beta of...
Chapter 07 Practice Test Question 06 Alpha and the CAPM A stock with a beta of 0.81 has an expected return of 11% and an alpha of 1.47% when the market expected return is 11%. What must be the risk free rate that satisfies these conditions? points Skipped eBook Print 10 0 0 0 References Chapter 07 Practice Test Question 07 Portfolio Beta An investor places $5,000 in Stock A, $4,000 in Stock B and $10,000 in Stock C. Stock...
Chapter 07 Practice Test Question 10 Working With the CAPM You believe that a stock is...
Chapter 07 Practice Test Question 10 Working With the CAPM You believe that a stock is fairly priced according to the CAPM. The stock has a beta of 2.8 when the market risk premium is 5.1% and the risk free rate is 2.6%. If the stock's dividend yield is 3.9% what is the stock's expected capital gain yield? points Skipped Multiple Choice eBook 0 Print 0 References 0 12.98% 0
Chapter 07 Practice Test Question 09 CAPM and Security Pricing Stock A has an expected return...
Chapter 07 Practice Test Question 09 CAPM and Security Pricing Stock A has an expected return of 28% and a beta of 2.3. Stock B has an expected return of 28% and a beta of 1.9 when the risk free rate is 5%. Which of the following statements are correct? points Skipped 1. Stock A is underpriced relative to Stock B II. Stock B is underpriced relative to Stock A III. This situation is inconsistent with the CAPM IV. This...
Chapter 06 Practice Test Question 05 Calculating Ex-Post Covariance An analyst obtains 24 annual return observations...
Chapter 06 Practice Test Question 05 Calculating Ex-Post Covariance An analyst obtains 24 annual return observations for Stock 1 and Stock 2. The analyst finds that the sum of the squared deviations from the mean for Stock 1 and Stock 2 are 1.8775 and 1.4197 respectively. The sum of the product of the deviations from the mean for Stock 1 and Stock 2 is 1.7528. The covariance between the stocks is points Skipped eBook 1 Print 0 0.0648 References 0...
00 Chapter 14 Practice Test Question 10 " Leverage and ROE Firm A uses debt and...
00 Chapter 14 Practice Test Question 10 " Leverage and ROE Firm A uses debt and has $580 in equity. Firm B does not use debt and has $1,000 in equity. Both firms pay a 39% tax rate and both firms have EBIT of $57. Firm A has interest expense of $32. There are no other expenses. If EBIT doubles for both firms ROE for Firm A will be_ ; ROE for Firm B will be points Skipped Multiple Choice...
Chapter 06 Practice Test Question 17 15 Asset Allocation Between Risky and Riskless Investments You have...
Chapter 06 Practice Test Question 17 15 Asset Allocation Between Risky and Riskless Investments You have a risky portfolio with a beta of 1.3. You wish to reduce the portfolio beta to 0.3. In order to do this you will change your asset allocation and add risk free government bonds. What percentage of your investment should be in government bonds and what percentage should be in the risky portfolio to accomplish your goal? points Skipped Multiple Choice eBook Print O...
Chapter 06 Practice Test Question 07 19 Calculating A Two Security Portfolio Standard Deviation An investor...
Chapter 06 Practice Test Question 07 19 Calculating A Two Security Portfolio Standard Deviation An investor puts 60% of their money in Stock 1 and the rest in Stock 2. Stock 1 has a standard deviation of 45% and Stock 2 has a standard deviation of 35%. The covariance between the two stocks is 0.091344. What is the portfolio's standard deviation? points Skipped Multiple Choice eBook 41.49% Print References 36.29% 34.96% 36.92%
Which of the following statement(s) is/are false? I. In an efficient market (strong form efficiency), fundamental...
Which of the following statement(s) is/are false? I. In an efficient market (strong form efficiency), fundamental analysis still provides value to an investor II. Based on the semi-strong form of the efficient market theory, an investor reacting immediately to a news flash on the television generaly cannot make a reasonable profit. III. Retail investors prefer weak form efficiency over strong form efficiency I only O ll only Ill only O 1 & Ill only O None of the above answers
Chapter 14 Practice Test Question 16 13 Ratios Using the firm's data provided below explain why...
Chapter 14 Practice Test Question 16 13 Ratios Using the firm's data provided below explain why the firm's ROA is less than the industry average of 59% given that the industry average asset turnover is 1.22 4 points $150 (mil) 70 15 $125 30 $ 35 Sales Skipped EBIT Interest Expense Assets Equity еВоok Net Profit Print Multiple Choice References The firm uses less debt than the industry. The firm is not generating enough sales from assets and has too...
Chapter 14 Practice Test Question 08 ROE A firm has net income of $28 million, assets of $228 million and liabilities of $65 million. What is the firm's ROE? points Skipped Multiple Choice eBook Print References Oo oo 16.71% 17.18% Chapter 14 Practice Test Question 09 ROE and ROA XYZ firm has EBIT of $26 and assets of $260. The firm's debt carries an interest rate of 4% and the firm has $1.30 of debt for every dollar of equity....
Chapter 07 Practice Test Question 06 Alpha and the CAPM A stock with a beta of 0.81 has an expected return of 11% and an alpha of 1.47% when the market expected return is 11%. What must be the risk free rate that satisfies these conditions? points Skipped eBook Print 10 0 0 0 References Chapter 07 Practice Test Question 07 Portfolio Beta An investor places $5,000 in Stock A, $4,000 in Stock B and $10,000 in Stock C. Stock...
Chapter 07 Practice Test Question 10 Working With the CAPM You believe that a stock is fairly priced according to the CAPM. The stock has a beta of 2.8 when the market risk premium is 5.1% and the risk free rate is 2.6%. If the stock's dividend yield is 3.9% what is the stock's expected capital gain yield? points Skipped Multiple Choice eBook 0 Print 0 References 0 12.98% 0
Chapter 07 Practice Test Question 09 CAPM and Security Pricing Stock A has an expected return of 28% and a beta of 2.3. Stock B has an expected return of 28% and a beta of 1.9 when the risk free rate is 5%. Which of the following statements are correct? points Skipped 1. Stock A is underpriced relative to Stock B II. Stock B is underpriced relative to Stock A III. This situation is inconsistent with the CAPM IV. This...
Chapter 06 Practice Test Question 05 Calculating Ex-Post Covariance An analyst obtains 24 annual return observations for Stock 1 and Stock 2. The analyst finds that the sum of the squared deviations from the mean for Stock 1 and Stock 2 are 1.8775 and 1.4197 respectively. The sum of the product of the deviations from the mean for Stock 1 and Stock 2 is 1.7528. The covariance between the stocks is points Skipped eBook 1 Print 0 0.0648 References 0...
00 Chapter 14 Practice Test Question 10 " Leverage and ROE Firm A uses debt and has $580 in equity. Firm B does not use debt and has $1,000 in equity. Both firms pay a 39% tax rate and both firms have EBIT of $57. Firm A has interest expense of $32. There are no other expenses. If EBIT doubles for both firms ROE for Firm A will be_ ; ROE for Firm B will be points Skipped Multiple Choice...
Chapter 06 Practice Test Question 17 15 Asset Allocation Between Risky and Riskless Investments You have a risky portfolio with a beta of 1.3. You wish to reduce the portfolio beta to 0.3. In order to do this you will change your asset allocation and add risk free government bonds. What percentage of your investment should be in government bonds and what percentage should be in the risky portfolio to accomplish your goal? points Skipped Multiple Choice eBook Print O...
Chapter 06 Practice Test Question 07 19 Calculating A Two Security Portfolio Standard Deviation An investor puts 60% of their money in Stock 1 and the rest in Stock 2. Stock 1 has a standard deviation of 45% and Stock 2 has a standard deviation of 35%. The covariance between the two stocks is 0.091344. What is the portfolio's standard deviation? points Skipped Multiple Choice eBook 41.49% Print References 36.29% 34.96% 36.92%
Which of the following statement(s) is/are false? I. In an efficient market (strong form efficiency), fundamental analysis still provides value to an investor II. Based on the semi-strong form of the efficient market theory, an investor reacting immediately to a news flash on the television generaly cannot make a reasonable profit. III. Retail investors prefer weak form efficiency over strong form efficiency I only O ll only Ill only O 1 & Ill only O None of the above answers
Chapter 14 Practice Test Question 16 13 Ratios Using the firm's data provided below explain why the firm's ROA is less than the industry average of 59% given that the industry average asset turnover is 1.22 4 points $150 (mil) 70 15 $125 30 $ 35 Sales Skipped EBIT Interest Expense Assets Equity еВоok Net Profit Print Multiple Choice References The firm uses less debt than the industry. The firm is not generating enough sales from assets and has too...
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