. If two stocks are correctly priced according to CAPM, they will have the same: ___A. beta. ___B. standard deviation. C. reward-to-risk ratio. ___D. market risk premium. X___E. rate of return.
If two stocks are correctly priced according to CAPM, they will have the same reward-to-risk ratio |
The securities correctly priced having differing betas have same reward-to-risk ratio |
Option C is correct |
. If two stocks are correctly priced according to CAPM, they will have the same: ___A....
Problem 1 2pts] According to the CAPM, what is the expected return of the stock with the standard deviation of the returns of 40% and the correlation between its returns and the market returns is -0.12 The market's expected return and standard deviation are 6% and 15%, respectively. The risk-free rate is 30 Problem 2 The risk-free rate is 1% and the market risk premium is 6%. Below table slows the ru characteristics of three stocks A, B, and C:...
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.
Suppose that securities are priced according to the CAPM. You have forecast the correlation coefficient between the rate of return on the High Value Mutual Fund (HVMF) and the market portfolio (M) at 0.8. Your forecasts of the standard deviations of the rate of return are 0.25 for HVFF and 0.20 for M. How would you combine the HVMF and a risk free security to obtain a portfolio with a beta of 1.6? Suppose that rf = 0.10 and E[rm...
Which one of the following stocks is correctly priced if the risk-free rate of return is 3.9 percent and the market risk premium is 8.4 percent? Stock Beta .77 1.55 1.36 1.33 .95 Expected Return 7.86% 12.65 17.33 11.93 11.88 Ο Stock E Ο Stock A Ο Stock D Ο Stock B Ο Stock C
According to the CAPM, what must be the beta of a portfolio with expected return 0.25, if the risk-free rate is 0.07 and the market risk premium is 0.12? Assume that the stock is fairly priced according to the CAPM.
4. Which one of the following stocks is correctly priced if the risk-free rate of return is 3.7 percent and the market risk premium is 8.2 percent? Stock Beta Expected Return A 0.73 7.84% B 1.53 17.50% C 1.34 11.28% D 1.29 11.87% E 0.95 11.49% a. Stock D b. Stock B c. Stock C . d. Stock E e. Stock A
#11 and #13
(CAPM) The stock is appropriately priced and its expected annual return is 10.4%. The annual return on the 30-year Treasury is 3.5%, and the expected annual return on S&P 500 is 13%. What is the stock's beta coefficient? 12. (CAPM) The stock is appropriately priced and its expected annual return is 14.1%. The annual return on the 30-year Treasury is 2.5%, and the expected annual return on S&P 500 is 12%. What is the stock's beta coefficient?...
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.) Stock Standard Deviation 14% 14 14 Beta 0.9 1.3 1.7 Expected Return 9.60 % 11.42 13.24 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and...
Given the following information for the two stocks: Stock Expected Return Standard Deviation Investment Beta 16% 15% 300 10% $30,000 $20,000 0.8 You construct a portfolio composing of stocks A and B according to the above information. Assume that the risk free rate is 6% and the market risk premium (MRP) is 9%. Use the CAPM analysis to numerically determine whether this 2- stock portfolio is fairly priced? What is your investment recommendation on this portfolio? Why? ?E(Re) = 15.6%...
Question 7 (1 point) According to the CAPM, if the risk-free rate is constant and the market risk premium (RmRr) creases byl centage point O a. Then the required return on all stocks will rise by 1 percentage point. O b. Then the required return will increase by 1percentage point for a stock that has a beta of 1.0 c. Then the required return will increase for stocks that have a beta greater than 1.0, but it will decrease for...