Homework Answers
The Capital Asset Pricing Model (CAPM) helps to understand the return expected by investors in the business. It determines the fair price for an investment, based on the risk, potential return and other factors.
CAPM provides a good understanding of the risk versus return on an investment. It is great tool to use when determining whether riskier assets are worth the investment. CAPM is based on the assumption that all investors have identical time horizon.
The answer is option b.
In case of any query, kindly comment on the solution.
Add Answer to:
Which of the following are assumptions of the simple CAPM model? I. Individual trades of investors do not affect a stoc...
The assumptions of the CAPM model include _______________ I. The stock's price can be affected by...
The assumptions of the CAPM model include _______________ I. The stock's price can be affected by investor's trades. II. All investors plan for various holding periods. III. All investors analyze securities in the same way and share the same economic view of the world. IV. All investors have different levels of risk aversion. A. I, II, and III only B. II and III only C. I, III, and IV only D. III and IV only
Based on the capital asset pricing model, investors are compensated based on which of the following?...
Based on the capital asset pricing model, investors are compensated based on which of the following? I. Market risk premium II. Risk-free rate III. Portfolio beta IV. Unsystematic risk 1) I, II, III, and IV 2) II and IV only 3) 1,111, and IV only 4) I and III only 5) I, II, and Ill only
Which of the following statements is (are) TRUE? I) Risk-aversion investors accept investments that are fair...
Which of the following statements is (are) TRUE? I) Risk-aversion investors accept investments that are fair games II) Risk-neutral investors judge investments only by expected returns – risk is not relevant III) Risk-averse and risk loving investors consider both an investment’s risk and return IV) Highly risk-averse investors would still allocate a small portion of their savings to stocks Choose from the options below: a) II only b) I only c) II,III and IV only d) I and II only...
Which of the following statements is (are) correct? I. Investors with home bias gain the benefits...
Which of the following statements is (are) correct? I. Investors with home bias gain the benefits of diversifying into foreign equities. II. Investors with greater risk aversion to downside loses may choose not to participate in the stock market III. Social interactions can affect the stock market participation. IV. Exchange change risk can explain some part of home bias.
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...
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 %...
A. Capital Allocation Lines The optimal CAL is found as the ray from the risk free...
A. Capital Allocation Lines The optimal CAL is found as the ray from the risk free rate that is tangent to the _____________ and is called the ________________. efficient frontier; CML minimum variance portfolio; high range CAL indifference curve; SML lower half of the investment opportunity set; CAPM B. Capital Allocation Portfolio 1 has a standard deviation of 35% and a Sharpe ratio of 0.48. Portfolio 2 has a standard deviation of 29% and a Sharpe ratio of 0.44. Portfolio...
The dividend growth model: I. cannot be used to value zero-growth stocks. II. cannot be used to compute a stock pri...
The dividend growth model: I. cannot be used to value zero-growth stocks. II. cannot be used to compute a stock price at any point in time. III. requires the required return to be higher than the growth rate. IV. assumes that dividends increase by a constant amount forever. V. none of the above is correct Multiple Choice 0 II, and IV only 0 V only 0 1, I, II, and IV only 0 Ill only 0 In order to estimate...
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...
6) Which of the following statements concerning the constant-growth dividend valuation model is (ar) correct 1....
6) Which of the following statements concerning the constant-growth dividend valuation model is (ar) correct 1. One simple method of estimating the dividend growth rate is to analyze the historical paltem of dividends II. The expected total return equals the return from capital gains plus the return from dividends TIL. The model is applicable to growth firms with initially high growth rates. IV. The intrinsic value calculated using this method can change from one investor to another if their risk-return...
Based on the capital asset pricing model, investors are compensated based on which of the following? I. Market risk premium II. Risk-free rate III. Portfolio beta IV. Unsystematic risk 1) I, II, III, and IV 2) II and IV only 3) 1,111, and IV only 4) I and III only 5) I, II, and Ill only
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...
The dividend growth model: I. cannot be used to value zero-growth stocks. II. cannot be used to compute a stock price at any point in time. III. requires the required return to be higher than the growth rate. IV. assumes that dividends increase by a constant amount forever. V. none of the above is correct Multiple Choice 0 II, and IV only 0 V only 0 1, I, II, and IV only 0 Ill only 0 In order to estimate...
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...
6) Which of the following statements concerning the constant-growth dividend valuation model is (ar) correct 1. One simple method of estimating the dividend growth rate is to analyze the historical paltem of dividends II. The expected total return equals the return from capital gains plus the return from dividends TIL. The model is applicable to growth firms with initially high growth rates. IV. The intrinsic value calculated using this method can change from one investor to another if their risk-return...
Most questions answered within 3 hours.
-
If
the more comprehensive data is available in MEPS, why does the NHIS
still exist? How...
asked 18 minutes ago -
Koo argues that the Japanese economy in the 1990s suffered from
a balance sheet recession. What...
asked 11 minutes ago -
Automobile mechanics conduct diagnosis tests on 150 new cars of
particular make and model to determine...
asked 5 minutes ago -
11) Find the proceeds of a 5 year non-interest
bearing note for $6500 discounted 2.5 years...
asked 12 minutes ago -
Required: Prepare the consolidated financial statements of
Griffin Ltd at 30 June 2019.
Griffin Ltd is...
asked 21 minutes ago -
1.How large must the coefficient of static friction be between
the tires and the road if...
asked 36 minutes ago -
What is the time complexity (Big-O) of the following code?
class Main
{
// Recursive...
asked 36 minutes ago -
Economists look at any situation in terms of its component
parts: the people making decisions, the...
asked 42 minutes ago -
What is a population?
Select one:
a. All of the individual organisms belonging to the same...
asked 46 minutes ago -
You have a yeast cell culture with a concentration of 5x10^4
cells/ml. If you dilute this...
asked 50 minutes ago -
In which direction the Reaction goes? Show detailed process.
SeO3 + 2ClO2. + 2H3O <---> Se...
asked 1 hour ago -
Unexposed silver halides are removed from photographic film when
they react with sodium thiosulfate
(Na2S2O3, called...
asked 1 hour ago