When the overall market is up by 15%, an investor with a portfolio of defensive stocks will probably have:
|A)||positive portfolio returns greater than 15%|
|B)||positive portfolio returns less than 15%|
|C)||negative portfolio returns greater than 15%|
|D)||negative portfolio returns less than 15%|
What is the beta of a three-stock portfolio including 20% of Stock A with a beta of 1.25, 30% Stock B with a beta of 1.15, and 50% with a beta of 1.20?
What is the expected yield on the market portfolio at a time when Treasury bills yield 5% and a stock with a beta of 1.20 is expected to yield 18%?
An investor was expecting a 10% return on his portfolio with a beta of 1.15 before the market risk premium increased from 5% to 7.5%. Based on this change, what return will now be expected on the portfolio?
What is the beta of a portfolio with an expected return of 15% if Treasury bills yield 7% and the market risk premium is 7%?
What happens to an expected portfolio return if the portfolio beta increases from 1.2 to 2.0, the risk-free rate decreases from 7.5% to 5% and the market risk premium remains at 9%?
|A)||It decreases from 23% to 18.3%|
|B)||It decreases from 28% to 13.3%|
|C)||It increases from 18.3% to 23%|
|D)||It increases from 13.3% to 28%|
An investor divides his/her portfolio evenly between Treasury bills, a market index and a diversified portfolio with a beta of 1.25. What is the beta of the investor's overall portfolio?
A project is determined to have equal probability of generating $1 million annually or $250,000 annually for four years. The initial outlay is $2 million. The expected return on Treasury bills is 6% and the market risk premium is 7%. What is the highest project beta that will justify acceptance of the project?
The CAPM provides a model of determining expected security returns that is:
|A)||excellent for high beta stocks|
|B)||excellent for well-diversified stocks|
|C)||imprecise, but generally an acceptable guideline|
|D)||precise in its calculation of risk premiums|
If the line measuring a stock's historic returns against the market's historic returns has a slope greater than 1.0, then the:
|A)||stock is currently under priced.|
|B)||market risk premium is increasing.|
|C)||stock has a significant amount of unique risk.|
|D)||stock has a beta exceeding 1.0.|
If you were willing to bet that the overall stock market was heading up on a sustained basis, it would be logical to invest in:
|A)||high beta stocks.|
|B)||low beta stocks.|
|C)||stocks with large amounts of unique risk.|
|D)||stocks that plot below the security market line.|
What is the beta of a three-stock portfolio including 25% of Stock A with a beta of .90, 40% Stock B with a beta of 1.05, and 35% Stock C with a beta of 1.73?
What will happen to the expected return on a stock with a beta of 1.5 and a market risk premium of 9% if the Treasury bill yield increases from 3% to 5%?
|A)||The expected return will remain unchanged.|
|B)||The expected return will increase by 1.0%.|
|C)||The expected return will increase by 2.0%.|
|D)||The expected return will increase by 3.0%.|
An investor was expecting an 18% return on his portfolio with beta of 1.25 before the market risk premium increased from 8% to 10%. Based on this change, what return will now be expected on the portfolio?
The company cost of capital may be an inappropriate discount rate for a capital budgeting proposal if:
|A)||it calculates a negative NPV for the proposal.|
|B)||the proposal has a different degree of risk.|
|C)||the company has unique risk.|
|D)||the company expects to earn more than the risk-free rate.|