Exam 10: Estimating Risk and Return

You have a portfolio with a beta of 1.25. What will be the new portfolio beta if you keep 80 percent of your money in the old portfolio and 20 percent in a stock with a beta of 1.75?

You hold the positions in the following table. What is the beta of your portfolio? If you expect the market to earn 10 percent and the risk-free rate is 4 percent, what is the required return of the portfolio?

The constant growth model assumes which of the following?

The annual return on the S&P 500 Index was 12.4 percent. The annual T-bill yield during the same period was 5.7 percent. What was the market risk premium during that year?

Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 0)2 23% Slow Growth 0)6 14% Recession 0)2 -30%

Which of the following is a model that includes an equation that relates a stock's required return to an appropriate risk premium?

Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 0)3 40% Slow Growth 0)4 15% Recession 0)3 -15%

Investor enthusiasm causes an inflated bull market that drives prices too high, ending in a dramatic collapse in prices is known as

In 2000, the S&P 500 Index earned 11 percent while the T-bill yield was 4.4 percent. Given this information, which of the following statements is correct with respect to the market risk premium?

Which of these is the set of probabilities for all possible occurrences?

Which of the following is the average of the possible returns weighted by the likelihood of those returns occurring?

Which of these is the measurement of risk for a collection of stocks for an investor?

Which of these is a theory that describes the types of information that are reflected in current stock prices?

Shares of stock issued to employees that have limitations on when they can be sold are known as

If the NASDAQ stock market bubble peaked at 3,750, and two and a half years later it had fallen to 2,200, what would be the percentage decline?

You have a portfolio with a beta of 3.1. What will be the new portfolio beta if you keep 85 percent of your money in the old portfolio and 15 percent in a stock with a beta of 4.5?

If the risk-free rate is 8 percent and the market risk premium is 2 percent, what is the required return for the market?

Which of these is the line on a graph of return and risk (standard deviation) from the risk-free rate through the market portfolio?

Which of the following is typically considered the return on U.S. government bonds and bills and equals the real interest plus the expected inflation premium?

All of the following are necessary conditions for an efficient market EXCEPT