The risk-return relationship for each financial asset is shown on
· Question 2
Bell Weather, Inc. has a beta of 1.25. The return on the market portfolio is 12.5%, and the risk-free rate is 5%. According to CAPM, what is the required return on this stock?
· Question 3
Your broker mailed you your year-end statement. You have $25,000 invested in Amazon, $18,000 tied up in Boeing, $36,000 in Caterpillar stock, and $11,000 in DuPont. The betas for each of your stocks are 1.43 for Amazon, .79 for Boeing, 1.37 for Caterpillar, and 1.71 for DuPont. What is the beta of your portfolio?
· Question 4
Given the capital asset pricing model, a security with a beta of 1.5 should return ________, if the risk-free rate is 3% and the market return is 11%.
· Question 5
You are thinking of adding one of two investments to an already well diversified portfolio.
If you are a risk-averse investor
· Question 6
On average, when the overall market changes by 10%, the stock of Veracity Communications changes 12%. Veracity’s beta is
· Question 7
A stock with a beta greater than 1.0 has returns that are ________ volatile than the market, and a stock with a beta of less than 1.0 exhibits returns which are ________ volatile than those of the market portfolio.
· Question 8
Your portfolio consists of $3,000 in ABC stock, $4,500 of DEF stock and $2,500 of GHI stock. Expected rates of return are ABC 5%, DEF 12%, and GHI 16%. What is the portfolio expected rate of return?
· Question 9
You hold a portfolio with the following securities:
Compute the expected return and beta for the portfolio.
· Question 10
Currently, the expected return on the market is 12.5% and the required rate of return for Alpha, Inc. is 12.5%. Therefore, Alpha’s beta must be
· Question 11
Which of the following is NOT an example of systematic risk?
· Question 12
The capital asset pricing model
· Question 13
Use the following information to answer the following question(s).
Beta
Market
1
Firm A
1.25
Firm B
0.6
Market Return
10%
Risk Free Rate
2%
Firm A’s risk premium is
· Question 14
The security market line (SML) relates risk to return, for a given set of market conditions. If expected inflation increases, which of the following would most likely occur?
· Question 15
The market risk premium is measured by
· Question 16
What type of risk can investors reduce through diversification?
· Question 17
Treize Industries’ common stock has an expected return of 13% and a beta of 1.3. If the expected risk-free return is 3%, what is the expected return for the market (round your answer to the nearest .1%)?
· Question 18
The expected return on ZV next year is 12% with a standard deviation of 20%. The expected return on TNA next year is 24% with a standard deviation of 30%. The correlation between the two stocks is -.6. If Hannah makes equal investments in ZV and TNA, what is the standard deviation of her portfolio?
· Question 19
If you hold a portfolio made up of the following stocks:
What is the beta of the portfolio?
· Question 20
The rate on six-month T-bills is currently 5%. Andvark Company stock has a beta of 1.69 and a required rate of return of 15.4%. According to CAPM, determine the return on the market portfolio.
· Question 21
Use the following information to answer the following question(s).
Beta
Market
1
Firm A
1.25
Firm B
0.6
Market Return
10%
Risk Free Rate
2%
Firm B’s risk premium is
· Question 22
Tanzlin Manufacturing’s common stock has a beta of 1.5. If the expected risk-free return is 2% and the expected return on the market is 14%, what is the expected return on the stock?
· Question 23
The Security Market Line intercepts the vertical axis at
· Question 24
If your portfolio consists of 20% RJH (expected return 16% ) 30% PAV (expected return -2%), and 50% MB (expected return 8%), what is the expected rate of return on the portfolio?
· Question 25
A stock’s beta is a measure of its
· Question 26
You are considering investing in U.S. Steel. Which of the following is an example of nondiversifiable risk?
· Question 27
Investment risk is
· Question 28
The beta of ABC Co. stock is the slope of
· Question 29
Siebling Manufacturing Company’s common stock has a beta of .8. If the expected risk-free return is 2% and the market offers a premium of 8% over the risk-free rate, what is the expected return on Siebling’s common stock?
· Question 30
You are thinking about purchasing 1,000 shares of stock in the following firms:
If you purchase the number of shares specified, then the beta of your portfolio will be
· Question 31
The expected return on VZ next year is 12% with a standard deviation of 20%. The expected return on ANT next year is 24% with a standard deviation of 30%. The correlation between the two stocks is .6. If Emily makes equal investments in VZ and ANT, what is the standard deviation of her portfolio?
· Question 32
Use the following information to answer the following question(s).
Beta
Market
1
Firm A
1.25
Firm B
0.6
Market Return
10%
Risk Free Rate
2%
The market risk premium is
· Question 33
Use the following information, which describes the expected return and standard deviation for three different assets, to answer the following question(s).
If an investor must choose between investing in either portfolio X or portfolio Y, then
· Question 34
Use the following information to answer the following question(s).
Beta
Market
1
Firm A
1.25
Firm B
0.6
Market Return
10%
Risk Free Rate
2%
The required rate of return for Firm A is
· Question 35
You are going to invest all of your funds in one of three projects with the following distribution of possible returns:
Project 1
Project 2
Standard Deviation 12%
Standard Deviation 19.5%
Probability
Return
Probability
Return
50% Chance
20%
30% Chance
30%
50% Chance
-4%
40% Chance
10%
30% Chance
-20%
Project 3 Standard Deviation 12%
Probability
Return
10% Chance
30%
40% Chance
15%
40% Chance
10%
10% Chance
-21%
If you are a risk-averse investor, which one should you choose?
· Question 36
A negative coefficient of correlation implies that
· Question 37
You are considering a portfolio of three stocks with 30% of your money invested in company X, 45% of your money invested in company Y, and 25% of your money invested in company Z. If the betas for each stock are 1.22 for company X, 1.46 for company Y, and 1.03 for company Z, what is the portfolio beta?
· Question 38
The security market line (SML) relates risk to return, for a given set of market conditions. If risk aversion increases, which of the following would most likely occur?
· Question 39
0 out of 1 points
You are considering investing in a portfolio consisting of 40% Electric General and 60% Buckstar. If the expected rate of return on Electric General is 16% and the expected return on Buckstar is 9%, what is the expected return on the portfolio?
· Question 40
Use the following information, which describes the expected return and standard deviation for three different assets, to answer the following question(s).
An investor will get maximum risk reduction by combining assets that are
· Question 41
What is the expected dollar return on a portfolio which consists of $9,000 invested in an S&P 500 Index fund, $32,500 in a technology fund, and $8,500 in Treasury Bills. The expected rate of return is 11% on the S&P Index fund, 14% on the technology fund and 2% on the Treasury Bills.
· Question 42
You are considering buying some stock in Continental Grain. Which of the following is an example of nondiversifiable risk?
· Question 43
You are considering investing in Ford Motor Company. Which of the following is an example of diversifiable risk?
· Question 44
The expected return on the market portfolio is currently 11%. Battmobile Corporation stockholders require a rate of return of 23.0%, and the stock has a beta of 2.5. According to CAPM, determine the risk-free rate.
· Question 45
The Elvis Alive Corporation, makers of Elvis memorabilia, has a beta of 2.35. The return on the market portfolio is 12%, and the risk-free rate is 2.5%. According to CAPM, what is the risk premium on a stock with a beta of 1.0?
· Question 46
Changes in the general economy, such as changes in interest rates or tax laws, represent what type of risk?
· Question 47
The expected return on MSFT next year is 12% with a standard deviation of 20%. The expected return on AAPL next year is 24% with a standard deviation of 30%. If James makes equal investments in MSFT and AAPL, what is the expected return on his portfolio?
· Question 48
What is the expected rate of return on a portfolio 18% of which is invested in an S&P 500 Index fund, 65% in a technology fund, and 17% in Treasury Bills. The expected rate of return is 11% on the S&P Index fund, 14% on the technology fund and 2% on the Treasury Bills.
· Question 49
Hefty stock has a beta of 1.2. If the risk-free rate is 7% and the market risk premium is 6.5%, what is the required rate of return on Hefty?
· Question 50
The appropriate measure for risk according to the capital asset pricing model is
The New York Times recently purchased the popular word game Wordle for more than $1 million. Before the purchase the game was offered for free. There is speculation that the New York Times may soon begin charging a fee to play the game. What kind of good is Wordle? Take
Explain whether each of the following is counted in the M1 measure of the money supply: Cash that you have been saving from birthdays and special occasions. Money in your savings account at your credit union. Money in your checking account at your credit union. Visa gift cards. Available balance
Which of the following best describes how the Federal Reserve might use the current ample reserves framework to reduce inflation during an expansion to achieve its low and predictable levels of inflation objective? Buy Treasury securities in the open market to increase the FFR. Sell Treasury securities in
What is the process by which the free market economy determines what goods and services should be produced? And how do non-free market economies decide which goods to produce? In general, what are the differences between market and centrally planned economies? You can contrast free-market economies like the USA with
You are a single taxpayer and your annual income is $175,000. Marginal tax rate is 28%. Calculate the total taxes that you owe the federal government for the year. Also calculate your average tax rate (ATR). How does it compare with the marginal tax rate in your income tax bracket?
Classical economists belief that prices and quantities adjust to the changes in the forces of supply and demand and that the economy produces its potential output in the long run. On the contrary, Keynesian economists believe because of price and wage rigidities the economy’s equilibrium output in the long run
Classical economists believe that prices and quantities adjust to the changes in the forces of supply and demand and that the economy produces its potential output in the long run. On the contrary, Keynesian economists believe because of price and wage rigidities the economy’s equilibrium output, in the long run,
After reviewing your chapters and watching the video below, answer the questions presented. Economic Schools of Thought: Crash Course Economics #14 Duration: 10:05User: n/a – Added: 11/6/15 https://www.youtube.com/watch?v=tZvjh1dxz08 Questions: 1. Economists believe in the “Long-run neutrality of money”; what does that mean? If monetary policies help in the short run but do
Explain the difference between Taste-Based Discrimination and Statistical Discrimination, and discuss how policies to address discrimination may be different if discrimination is primarily Taste-Based Discrimination vs. Statistical Discrimination.
The concept of scarcity applies to our everyday lives. Give an example of a scarce resource as it applies to you and how you would efficiently allocate this resource among competing needs. Express your opinion here and post your comments as often as possible
Which of the following is true? O Economic growth moves us along our PPC toward more high tech products. O World War II was a time when we were inside our PPC. • The Great Depression was a time when we were inside our PPC. • Through economic growth we
Suppose that Darnell, an economist from a business school in Georgia, and Eleanor, an economist from a public television program, are arguing over government bailouts. The following dialogue shows an excerpt from their debate: Eleanor: Thanks to recent financial crises, the concept of bailouts is a hot topic for
Please answer all three questions below and kindly please answer correctly and carefully. 2. Complete the following table by selecting the term that matches each definition. Below Please answer this question as well and choose one option. 1. A graphical object showing the relationship between the price of a good and
1. Most countries prevent the legal sale of organs. While Iranian citizens can sell their kidneys, there still exists a price ceiling of $4,600. Compare and contrast the impact of rent control and the organ price ceiling in Iran. 2. Search of the price of kidneys on the black market
The fallacy of composition: A) is the assumption that what is true for the parts must also be true for the whole B) refers to compositions that are logically inconsistent C) states that many economic theories are fallacious D) is the assertion that the whole is always more than its
Trend Line method: Construct a potential GDP estimate is by fitting a trend line through actual GDP. The trend is interpreted as a measure of the economy’s potential output and the cycle as a measure of the output gap. The trick is to remove the cyclical changes. 2. The Hodrick-Prescott filter:
(C) How does the Production Possibilities Frontier (PPF) (also called as Production Possibilities Curve (PPC) illustrate the concept of trade-offs? (D) How do we describe points (1) On the PPF (2) Inside the PPF, and (3) Beyond the PPF in terms of production efficiency?
If a country’s economic data shows private savings of 515 million dollars, public savings of 134 million dollars, and a trade deficit of 16 million dollars, then what does investment equal in millions of dollars?
