Exam 12: Return,Risk,and the Security Market Line

According to the capital asset pricing model,which of the following will increase the expected rate of return on a security that has a beta that is less than that of the market? Assume the market rate of return is greater than the risk-free rate and both rates are positive. I.increase in the risk-free rate II.decrease in the risk-free rate III.increase in the market risk premium IV.decrease in the market rate of return

Where will a security plot in relation to the security market line (SML)if it is considered to be a good purchase because it is underpriced?

The following portfolio has an expected return of ________ percent and a beta of ________.

The market has an expected return of 11.3 percent and a risky asset with a beta of 1.18 has an expected return of 13 percent.Based on this information,what is the pure time value of money?

Where will a security plot in relation to the security market line (SML)if it has a beta of 1.1 and is overvalued?

A risky asset has a beta of 1.40 and an expected return of 17.6 percent.What is the risk-free rate if the risk-to-reward ratio is 8.4 percent?

Which one of the following statements is true?

Which one of the following stocks has the highest expected risk premium?

What is the beta of a risk-free security?

Which of the following are needed to compute the beta of an individual security? I.average return on the market for the period II.standard deviation of the security and the market III.returns on the security and the market for multiple time periods IV.correlation of the security to the market

Stock X has a beta of 1.02 and an expected return of 11.8 percent.Stock Y has a beta of 1.15 and an expected return of 13.1 percent.What is the risk-free rate of return assuming that both stock X and stock Y are correctly priced?

The following portfolio has an expected return of ________ percent and a beta of ________.

A portfolio consists of two stocks and has a beta of 1.25.The first stock has a beta of 1.02 and comprises 30 percent of the portfolio.What is the beta of the second stock?

Which one of the following is the best example of systematic risk?

The reward-to-risk ratio is 7.0 percent and the risk-free rate is 4.4 percent.What is the expected return on a risky asset if the beta of that asset is 1.10?

Brooke invested $4,500 in the stock market with the expectation of earning 6.25 percent.She actually earned 7.15 percent for the year.What is the amount of her unexpected return?

The common stock of Blasco Books has a standard deviation of 16.4 percent as compared to the market standard deviation of 12.7 percent.The covariance of this stock with the market is .0217.What is the beta of Blasco Books' stock?

The risk-free rate is 4.0 percent and the expected return on the market is 8 percent.Stock A has a beta of 1.35.For a given year,Stock A returned 12.0 percent while the market returned 8.80 percent.The systematic portion of Stock A's unexpected return was ________ percent and the unsystematic portion was ________ percent.

A stock has a standard deviation of 21.0 percent and a covariance with the market of .0110.The market has a standard deviation of 12.0 percent.What is the beta of this stock?

Wilson Farms' stock has a beta of .84 and an expected return of 7.8 percent.The risk-free rate is 2.6 percent and the market risk premium is 6 percent.This stock is ________ because the CAPM return for the stock is ________ percent.