投资学第7版testbank答案09.docx

投资学第7版testbank答案09.docx

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投资学第7版testbank答案09

MultipleChoiceQuestions

1.InthecontextoftheCapitalAssetPricingModel（CAPM）therelevantmeasureofriskis

A）uniquerisk.

B）beta.

C）standarddeviationofreturns.

D）varianceofreturns.

E）noneoftheabove.

Answer:

BDifficulty:

Easy

Rationale:

Once,aportfolioisdiversified,theonlyriskremainingissystematicrisk,whichismeasuredbybeta.

2.AccordingtotheCapitalAssetPricingModel（CAPM）awelldiversifiedportfolio'srateofreturnisafunctionof

A）marketrisk

B）unsystematicrisk

C）uniquerisk.

D）reinvestmentrisk.

E）noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

Withadiversifiedportfolio,theonlyriskremainingismarket,orsystematic,risk.ThisistheonlyriskthatinfluencesreturnaccordingtotheCAPM.

3.Themarketportfoliohasabetaof

A）0.

B）1.

C）-1.

D）.

E）noneoftheabove

Answer:

BDifficulty:

Easy

Rationale:

Bydefinition,thebetaofthemarketportfoliois1.

4.Therisk-freerateandtheexpectedmarketrateofreturnareand,respectively.Accordingtothecapitalassetpricingmodel（CAPM）,theexpectedrateofreturnonsecurityXwithabetaofisequalto

A）.

B）.

C）.

D）

E）

Answer:

DDifficulty:

Easy

Rationale:

E（R）=6%+（12-6）=%.

5.Therisk-freerateandtheexpectedmarketrateofreturnareand,respectively.Accordingtothecapitalassetpricingmodel（CAPM）,theexpectedrateofreturnonasecuritywithabetaofisequalto

A）

B）.

C）.

D）

E）

Answer:

ADifficulty:

Easy

Rationale:

E（R）=%+-=%.

6.Whichstatementisnottrueregardingthemarketportfolio

A）Itincludesallpubliclytradedfinancialassets.

B）Itliesontheefficientfrontier.

C）Allsecuritiesinthemarketportfolioareheldinproportiontotheirmarketvalues.

D）Itisthetangencypointbetweenthecapitalmarketlineandtheindifferencecurve.

E）Alloftheabovearetrue.

Answer:

DDifficulty:

Moderate

Rationale:

Thetangencypointbetweenthecapitalmarketlineandtheindifferencecurveistheoptimalportfolioforaparticularinvestor.

7.WhichstatementisnottrueregardingtheCapitalMarketLine（CML）

A）TheCMListhelinefromtherisk-freeratethroughthemarketportfolio.

B）TheCMListhebestattainablecapitalallocationline.

C）TheCMLisalsocalledthesecuritymarketline.

D）TheCMLalwayshasapositiveslope.

E）TheriskmeasurefortheCMLisstandarddeviation.

Answer:

CDifficulty:

Moderate

Rationale:

BoththeCapitalMarketLineandtheSecurityMarketLinedepictrisk/returnrelationships.However,theriskmeasurefortheCMLisstandarddeviationandtheriskmeasurefortheSMLisbeta（thusCisnottrue;theotherstatementsaretrue）.

8.Themarketrisk,beta,ofasecurityisequalto

A）thecovariancebetweenthesecurity'sreturnandthemarketreturndividedbythevarianceofthemarket'sreturns.

B）thecovariancebetweenthesecurityandmarketreturnsdividedbythestandarddeviationofthemarket'sreturns.

C）thevarianceofthesecurity'sreturnsdividedbythecovariancebetweenthesecurityandmarketreturns.

D）thevarianceofthesecurity'sreturnsdividedbythevarianceofthemarket'sreturns.

E）noneoftheabove.

Answer:

ADifficulty:

Moderate

Rationale:

Betaisameasureofhowasecurity'sreturncovarieswiththemarketreturns,normalizedbythemarketvariance.

9.AccordingtotheCapitalAssetPricingModel（CAPM）,theexpectedrateofreturnonanysecurityisequalto

A）Rf+β[E（RM）].

B）Rf+β[E（RM）-Rf].

C）β[E（RM）-Rf].

D）E（RM）+Rf.

E）noneoftheabove.

Answer:

BDifficulty:

Moderate

Rationale:

Theexpectedrateofreturnonanysecurityisequaltotheriskfreerateplusthesystematicriskofthesecurity（beta）timesthemarketriskpremium,E（RM-Rf）.

10.TheSecurityMarketLine（SML）is

A）thelinethatdescribestheexpectedreturn-betarelationshipforwell-diversifiedportfoliosonly.

B）alsocalledtheCapitalAllocationLine.

C）thelinethatistangenttotheefficientfrontierofallriskyassets.

D）thelinethatrepresentstheexpectedreturn-betarelationship.

E）thelinethatrepresentstherelationshipbetweenanindividualsecurity'sreturnandthemarket'sreturn.

Answer:

DDifficulty:

Moderate

Rationale:

TheSMLisameasureofexpectedreturnperunitofrisk,whereriskisdefinedasbeta（systematicrisk）.

11.AccordingtotheCapitalAssetPricingModel（CAPM）,fairlypricedsecurities

A）havepositivebetas.

B）havezeroalphas.

C）havenegativebetas.

D）havepositivealphas.

E）noneoftheabove.

Answer:

BDifficulty:

Moderate

Rationale:

Azeroalpharesultswhenthesecurityisinequilibrium（fairlypricedforthelevelofrisk）.

12.AccordingtotheCapitalAssetPricingModel（CAPM）,underpricedsecurities

A）havepositivebetas.

B）havezeroalphas.

C）havenegativebetas.

D）havepositivealphas.

E）noneoftheabove.

Answer:

DDifficulty:

Moderate

13.AccordingtotheCapitalAssetPricingModel（CAPM）,overpricedsecurities

A）havepositivebetas.

B）havezeroalphas.

C）havenegativebetas.

D）havepositivealphas.

E）noneoftheabove.

Answer:

CDifficulty:

Moderate

Rationale:

Azeroalpharesultswhenthesecurityisinequilibrium（fairlypricedforthelevelofrisk）.

14.AccordingtotheCapitalAssetPricingModel（CAPM）,

A）asecuritywithapositivealphaisconsideredoverpriced.

B）asecuritywithazeroalphaisconsideredtobeagoodbuy.

C）asecuritywithanegativealphaisconsideredtobeagoodbuy.

D）asecuritywithapositivealphaisconsideredtobeunderpriced.

E）noneoftheabove.

Answer:

DDifficulty:

Moderate

Rationale:

Asecuritywithapositivealphaisonethatisexpectedtoyieldanabnormalpositiverateofreturn,basedontheperceivedriskofthesecurity,andthusisunderpriced.

15.AccordingtotheCapitalAssetPricingModel（CAPM）,whichoneofthefollowingstatementsisfalse

A）Theexpectedrateofreturnonasecuritydecreasesindirectproportiontoadecreaseintherisk-freerate.

B）Theexpectedrateofreturnonasecurityincreasesasitsbetaincreases.

C）Afairlypricedsecurityhasanalphaofzero.

D）Inequilibrium,allsecuritieslieonthesecuritymarketline.

E）Alloftheabovestatementsaretrue.

Answer:

ADifficulty:

Moderate

Rationale:

StatementsB,C,andDaretrue,butstatementAisfalse.

16.Inawelldiversifiedportfolio

A）marketriskisnegligible.

B）systematicriskisnegligible.

C）unsystematicriskisnegligible.

D）nondiversifiableriskisnegligible.

E）noneoftheabove.

Answer:

CDifficulty:

Moderate

Rationale:

Market,orsystematic,ornondiversifiable,riskispresentinadiversifiedportfolio;theunsystematicriskhasbeeneliminated.

17.Empiricalresultsregardingbetasestimatedfromhistoricaldataindicatethat

A）betasareconstantovertime.

B）betasofallsecuritiesarealwaysgreaterthanone.

C）betasarealwaysnearzero.

D）betasappeartoregresstowardoneovertime.

E）betasarealwayspositive.

Answer:

DDifficulty:

Moderate

Rationale:

Betasvaryovertime,betasmaybenegativeorlessthanone,betasarenotalwaysnearzero;however,betasdoappeartoregresstowardoneovertime.

18.Yourpersonalopinionisthatasecurityhasanexpectedrateofreturnof.Ithasabetaof.Therisk-freerateisandthemarketexpectedrateofreturnis.AccordingtotheCapitalAssetPricingModel,thissecurityis

A）underpriced.

B）overpriced.

C）fairlypriced.

D）cannotbedeterminedfromdataprovided.

E）noneoftheabove.

Answer:

CDifficulty:

Moderate

Rationale:

11%=5%+（9%-5%）=%;therefore,thesecurityisfairlypriced.

19.Therisk-freerateis7percent.Theexpectedmarketrateofreturnis15percent.Ifyouexpectastockwithabetaoftoofferarateofreturnof12percent,youshould

A）buythestockbecauseitisoverpriced.

B）sellshortthestockbecauseitisoverpriced.

C）sellthestockshortbecauseitisunderpriced.

D）buythestockbecauseitisunderpriced.

E）noneoftheabove,asthestockisfairlypriced.

Answer:

BDifficulty:

Moderate

Rationale:

12%<7%+（15%-7%）=%;therefore,stockisoverpricedandshouldbeshorted.

20.Youinvest$600inasecuritywithabetaofand$400inanothersecuritywithabetaof.Thebetaoftheresultingportfoliois

A）

B）

C）

D）

E）

Answer:

DDifficulty:

Moderate

Rationale:

+=.

21.Asecurityhasanexpectedrateofreturnofandabetaof.Themarketexpectedrateofreturnisandtherisk-freerateis.Thealphaofthestockis

A）%.

B）%.

C）%.

D）%.

E）noneoftheabove.

Answer:

ADifficulty:

Moderate

Rationale:

10%-[5%+（8%-5%）]=%.

22.YouropinionisthatCSCOhasanexpectedrateofreturnof.Ithasabetaof.Therisk-freerateisandthemarketexpectedrateofreturnis.AccordingtotheCapitalAssetPricingModel,thissecurityis

A）underpriced.

B）overpriced.

C）fairlypriced.

D）cannotbedeterminedfromdataprovided.

E）noneoftheabove.

Answer:

BDifficulty:

Moderate

Rationale:

%-4%+%-4%）=%;therefore,thesecurityisoverpriced.

23.YouropinionisthatCSCOhasanexpectedrateofreturnof.Ithasabetaof.Therisk-freerateisandthemarketexpectedrateofreturnis.AccordingtotheCapitalAssetPricingModel,thissecurityis

A）underpriced.

B）overpriced.

C）fairlypriced.

D）cannotbedeterminedfromdataprovided.

E）none