Use the following three statements to answer this question: I. When and we know the return...
Use the following three statements to answer this question: I. When and we know the return on Security A, we can predict the return on Security B with certainty. II. Generally, security returns display positive correlations with one another but they are less than one, because all securities tend not to follow the movements of the overall market. III. Any value of correlation less than +1 provides a possibility of diversification.
Select one:
a. I is incorrect, II is correct, III is correct.
b. I and II are correct, III is incorrect.
c. I is correct, II is incorrect, III is correct.
d. I and II are incorrect, III is incorrect.
Homework Answers
Request Answer!
We need at least 10 more requests to produce the answer.
0 / 10 have requested this problem solution
The more requests, the faster the answer.
Add Answer to:
Use the following three statements to answer this question: I.
When and we know the return...
Need help with this question: Use the following three statements to answer this question: I. The...
Need help with this question:
Use the following three statements to answer this question:
I. The CAPM points out that rational investors should be
compensated for unique risk.
II. The CAPM implies that non-systematic risk is the appropriate
measure of risk to determine the risk premium required by investors
for holding a risky security.
III. The expected return from non-systematic risk is
zero.
a
I, II and III are correct.
b
I and II are incorrect, III is correct.
c...
Based on the outcomes in the following table, choose which of the statements below is (are)...
Based on the outcomes in the following table, choose which of the statements below is (are) correct? Scenario Security A Security B Security C Recession Return > E(r) Return = E(r) Return < E(r) Normal Return = E(r) Return = E(r) Return = E(r) Boom Return < E(r) Return = E(r) Return > E(r) I. The covariance of security A and security B is 50. II. The correlation coefficient between securities A and C is negative. III. The correlation coefficient...
Use the following three statements to answer this question: I. Beta is constant over time. II....
Use the following three statements to answer this question: I. Beta is constant over time. II. Empirically beta is never negative. III. Negative beta implies a negative standard deviation. I, II and III are correct. I, II and III are incorrect. I is correct, II and III are incorrect. I, II are incorrect, III is correct.
Which of the following statements is/are INCORRECT? I. Beta measures a security's market risk, also known...
Which of the following statements is/are INCORRECT? I. Beta measures a security's market risk, also known as systematic risk. II. SML is a graphical depiction of WACC model. III. If investors become more risk averse, the slope of SML will increase accordingly. IV. Other things being equal, a security's required rate of return doubles when its beta value doubles. V. Diversification will normally reduce the riskiness of a portfolio of securities. VI. Federal Reserve cuts an interest rate is considered...
Which of the following statements are FALSE? I. The Security Market Line (SML) displays the relationship...
Which of the following statements are FALSE? I. The Security Market Line (SML) displays the relationship between expected return on investment and standard deviation of return. If a security plots below the SML, it is offering too little return to justify its risk. II. If a stock lies below the SML, it is overpriced and it presents a selling opportunity. III. The expected return on an investment with a beta of 2.0 is twice as high as the expected return...
Question 5 1 pts Which of the following statement is incorrect? The return that well-diversified investors...
Question 5 1 pts Which of the following statement is incorrect? The return that well-diversified investors demand when they buy a security, as measured by the CAPM and beta, relates to the degree of nondiversifiable risk in the security The diversification effect results in risk reduction because we are combining two assets that have returns that are negatively correlated (r=-1.0). The CAPM is used to determine the appropriate coefficient of variation for projects of different degrees of risk. The market...
Which of the following statements is true? I. If the p-value is 0.01, we reject H0...
Which of the following statements is true? I. If the p-value is 0.01, we reject H0 for any alpha level less than 0.01. II. If we use an alpha level of 0.05, then a p-value of 0.005 is not statistically significant. III. If we use an alpha level of 0.05, then we fail to reject the null hypothesis if the p-value is 0.1. Group of answer choices I only II only III only I and III II and III
10. Which of the following must total to 100 percent? I. rates of return for the...
10. Which of the following must total to 100 percent? I. rates of return for the various economic states II. portfolio weights Ⅲ. probabilities of occurrence for the various economic states IV. betas of the individual securities held within a portfolio A). I and III only B). II and IV only C). II and III only D). II, III, and IV only E). I, II, III, and I 11. Which of following statements is correct, everything else equal? A) B)...
Suppose the economy can only be in one of the following two states: (i) Boom or...
Suppose the economy can only be in one of the following two states: (i) Boom or “good” state and (ii) Recession or “bad” state. Each of the states can occur with an equal probability. At the beginning of a month, you can purchase the following two securities in the market: • Security 1: It is currently trading at $4. At the end of the month, the stock price is expected to increase by $10 in the good state and expected...
Problem 8-13 CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C....
Problem 8-13 CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) 1.3 Stock Expected Return Standard Deviation Beta 9.28 % 14 % 0.8 11.33 14 12.15 14 1.5 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate...
Need help with this question:
Use the following three statements to answer this question:
I. The CAPM points out that rational investors should be
compensated for unique risk.
II. The CAPM implies that non-systematic risk is the appropriate
measure of risk to determine the risk premium required by investors
for holding a risky security.
III. The expected return from non-systematic risk is
zero.
a
I, II and III are correct.
b
I and II are incorrect, III is correct.
c...
Which of the following statements is/are INCORRECT? I. Beta measures a security's market risk, also known as systematic risk. II. SML is a graphical depiction of WACC model. III. If investors become more risk averse, the slope of SML will increase accordingly. IV. Other things being equal, a security's required rate of return doubles when its beta value doubles. V. Diversification will normally reduce the riskiness of a portfolio of securities. VI. Federal Reserve cuts an interest rate is considered...
Question 5 1 pts Which of the following statement is incorrect? The return that well-diversified investors demand when they buy a security, as measured by the CAPM and beta, relates to the degree of nondiversifiable risk in the security The diversification effect results in risk reduction because we are combining two assets that have returns that are negatively correlated (r=-1.0). The CAPM is used to determine the appropriate coefficient of variation for projects of different degrees of risk. The market...
10. Which of the following must total to 100 percent? I. rates of return for the various economic states II. portfolio weights Ⅲ. probabilities of occurrence for the various economic states IV. betas of the individual securities held within a portfolio A). I and III only B). II and IV only C). II and III only D). II, III, and IV only E). I, II, III, and I 11. Which of following statements is correct, everything else equal? A) B)...
Problem 8-13 CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) 1.3 Stock Expected Return Standard Deviation Beta 9.28 % 14 % 0.8 11.33 14 12.15 14 1.5 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate...
Most questions answered within 3 hours.
-
Part 1. Primitive Types, Sorting, Recursion for
Homework.java
a) Implement the static method initializeArray that receives...
asked 30 minutes ago -
Using C++, build a sorter that can rank a sequence of numbers in
a descending order....
asked 26 minutes ago -
Derive ground state term symbols. Use notation 2S(1/2) for state
2S1/2
a) d5
b) f3
c)...
asked 50 minutes ago -
A sample of size 31 will be drawn from a population with mean 39
and standard...
asked 1 hour ago -
What is the effect on the P-value when a test is changed from a
two-tailed hypothesis...
asked 1 hour ago -
I wish to estimate µ, the mean of a population. After I collect
and an-
alyze...
asked 2 hours ago -
At a local university, you poll a group of 115 students and find
that 37 of...
asked 1 hour ago -
Gladstone company tracks the number of units purchased and sold
throughout each accounting period but applies...
asked 1 hour ago -
When determining if a molecule's configuration is E or Z, what
determines the higher priority groups?
asked 1 hour ago -
13. What is the amount
of conversion cost transferred to finished goods? (Round
your intermediate calculations...
asked 1 hour ago -
Sulfuric Acid is a "strong" acid, but only releases a single
proton when it dissolves. What...
asked 1 hour ago -
The
second floor of a house is 6 m above the street level. How much
work...
asked 1 hour ago