投资学课后答案解析APT.docx

投资学课后答案解析APT.docx

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投资学课后答案解析APT

Chapter10

ArbitragePricingTheoryandMultifactorModelsofRiskandReturn

MultipleChoiceQuestions

1. ___________arelationshipbetweenexpectedreturnandrisk. 

A. APTstipulates

B. CAPMstipulates

C. BothCAPMandAPTstipulate

D. NeitherCAPMnorAPTstipulate

E. Nopricingmodelhasfound

2. ConsiderthemultifactorAPTwithtwofactors.StockAhasanexpectedreturnof17.6%,abetaof1.45onfactor1andabetaof.86onfactor2.Theriskpremiumonthefactor1portfoliois3.2%.Therisk-freerateofreturnis5%.Whatistherisk-premiumonfactor2ifnoarbitrageopportunitiesexit?

A. 9.26%

B. 3%

C. 4%

D. 7.75%

E. 9.75%

3. Inamulti-factorAPTmodel,thecoefficientsonthemacrofactorsareoftencalled______. 

A. systemicrisk

B. factorsensitivities

C. idiosyncraticrisk

D. factorbetas

E. bothfactorsensitivitiesandfactorbetas

4. Inamulti-factorAPTmodel,thecoefficientsonthemacrofactorsareoftencalled______. 

A. systemicrisk

B. firm-specificrisk

C. idiosyncraticrisk

D. factorbetas

E. uniquerisk

5. Inamulti-factorAPTmodel,thecoefficientsonthemacrofactorsareoftencalled______. 

A. systemicrisk

B. firm-specificrisk

C. idiosyncraticrisk

D. factorloadings

E. uniquerisk

6. Whichpricingmodelprovidesnoguidanceconcerningthedeterminationoftheriskpremiumonfactorportfolios?

A. TheCAPM

B. ThemultifactorAPT

C. BoththeCAPMandthemultifactorAPT

D. NeithertheCAPMnorthemultifactorAPT

E. Nopricingmodelcurrentlyexiststhatprovidesguidanceconcerningthedeterminationoftheriskpremiumonanyportfolio

7. Anarbitrageopportunityexistsifaninvestorcanconstructa__________investmentportfoliothatwillyieldasureprofit. 

A. smallpositive

B. smallnegative

C. zero

D. largepositive

E. largenegative

8. TheAPTwasdevelopedin1976by____________. 

A. Lintner

B. ModiglianiandMiller

C. Ross

D. Sharpe

E. Fama

9. A_________portfolioisawell-diversifiedportfolioconstructedtohaveabetaof1ononeofthefactorsandabetaof0onanyotherfactor. 

A. factor

B. market

C. index

D. factorandmarket

E. factor,market,andindex

10. Theexploitationofsecuritymispricinginsuchawaythatrisk-freeeconomicprofitsmaybeearnediscalled___________. 

A. arbitrage

B. capitalassetpricing

C. factoring

D. fundamentalanalysis

E. technicalanalysis

11. IndevelopingtheAPT,Rossassumedthatuncertaintyinassetreturnswasaresultof 

A. acommonmacroeconomicfactor.

B. firm-specificfactors.

C. pricingerror.

D. neithercommonmacroeconomicfactorsnorfirm-specificfactors.

E. bothcommonmacroeconomicfactorsandfirm-specificfactors.

12. The____________providesanunequivocalstatementontheexpectedreturn-betarelationshipforallassets,whereasthe_____________impliesthatthisrelationshipholdsforallbutperhapsasmallnumberofsecurities. 

A. APT;CAPM

B. APT;OPM

C. CAPM;APT

D. CAPM;OPM

E. APTandOPM;CAPM

13. ConsiderasinglefactorAPT.PortfolioAhasabetaof1.0andanexpectedreturnof16%.PortfolioBhasabetaof0.8andanexpectedreturnof12%.Therisk-freerateofreturnis6%.Ifyouwantedtotakeadvantageofanarbitrageopportunity,youshouldtakeashortpositioninportfolio__________andalongpositioninportfolio_______. 

A. A;A

B. A;B

C. B;A

D. B;B

E. A;therisklessasset

14. ConsiderthesinglefactorAPT.PortfolioAhasabetaof0.2andanexpectedreturnof13%.PortfolioBhasabetaof0.4andanexpectedreturnof15%.Therisk-freerateofreturnis10%.Ifyouwantedtotakeadvantageofanarbitrageopportunity,youshouldtakeashortpositioninportfolio_________andalongpositioninportfolio_________. 

A. A;A

B. A;B

C. B;A

D. B;B

E. Noarbitrageopportunityexists.

15. Considertheone-factorAPT.Thevarianceofreturnsonthefactorportfoliois6%.Thebetaofawell-diversifiedportfolioonthefactoris1.1.Thevarianceofreturnsonthewell-diversifiedportfolioisapproximately__________. 

A. 3.6%

B. 6.0%

C. 7.3%

D. 10.1%

E. 8.6%

16. Considertheone-factorAPT.Thestandarddeviationofreturnsonawell-diversifiedportfoliois18%.Thestandarddeviationonthefactorportfoliois16%.Thebetaofthewell-diversifiedportfolioisapproximately__________. 

A. 0.80

B. 1.13

C. 1.25

D. 1.56

E. 0.93

17. Considerthesingle-factorAPT.StocksAandBhaveexpectedreturnsof15%and18%,respectively.Therisk-freerateofreturnis6%.StockBhasabetaof1.0.Ifarbitrageopportunitiesareruledout,stockAhasabetaof__________. 

A. 0.67

B. 1.00

C. 1.30

D. 1.69

E. 0.75

18. ConsiderthemultifactorAPTwithtwofactors.StockAhasanexpectedreturnof16.4%,abetaof1.4onfactor1andabetaof.8onfactor2.Theriskpremiumonthefactor1portfoliois3%.Therisk-freerateofreturnis6%.Whatistherisk-premiumonfactor2ifnoarbitrageopportunitiesexit?

A. 2%

B. 3%

C. 4%

D. 7.75%

E. 6.89%

19. ConsiderthemultifactormodelAPTwithtwofactors.PortfolioAhasabetaof0.75onfactor1andabetaof1.25onfactor2.Theriskpremiumsonthefactor1andfactor2portfoliosare1%and7%,respectively.Therisk-freerateofreturnis7%.TheexpectedreturnonportfolioAis__________ifnoarbitrageopportunitiesexist. 

A. 13.5%

B. 15.0%

C. 16.5%

D. 23.0%

E. 18.7%

20. ConsiderthemultifactorAPTwithtwofactors.Theriskpremiumsonthefactor1andfactor2portfoliosare5%and6%,respectively.StockAhasabetaof1.2onfactor1,andabetaof0.7onfactor2.TheexpectedreturnonstockAis17%.Ifnoarbitrageopportunitiesexist,therisk-freerateofreturnis___________. 

A. 6.0%

B. 6.5%

C. 6.8%

D. 7.4%

E. 7.7%

21. Consideraone-factoreconomy.PortfolioAhasabetaof1.0onthefactorandportfolioBhasabetaof2.0onthefactor.TheexpectedreturnsonportfoliosAandBare11%and17%,respectively.Assumethattherisk-freerateis6%andthatarbitrageopportunitiesexist.Supposeyouinvested$100,000intherisk-freeasset,$100,000inportfolioB,andsoldshort$200,000ofportfolioA.Yourexpectedprofitfromthisstrategywouldbe______________. 

A. −$1,000

B. $0

C. $1,000

D. $2,000

E. $1,600

22. Considertheone-factorAPT.Assumethattwoportfolios,AandB,arewelldiversified.ThebetasofportfoliosAandBare1.0and1.5,respectively.TheexpectedreturnsonportfoliosAandBare19%and24%,respectively.Assumingnoarbitrageopportunitiesexist,therisk-freerateofreturnmustbe____________. 

A. 4.0%

B. 9.0%

C. 14.0%

D. 16.5%

E. 8.2%

23. ConsiderthemultifactorAPT.Theriskpremiumsonthefactor1andfactor2portfoliosare5%and3%,respectively.Therisk-freerateofreturnis10%.StockAhasanexpectedreturnof19%andabetaonfactor1of0.8.StockAhasabetaonfactor2of________. 

A. 1.33

B. 1.50

C. 1.67

D. 2.00

E. 1.73

24. ConsiderthesinglefactorAPT.PortfoliosAandBhaveexpectedreturnsof14%and18%,respectively.Therisk-freerateofreturnis7%.PortfolioAhasabetaof0.7.Ifarbitrageopportunitiesareruledout,portfolioBmusthaveabetaof__________. 

A. 0.45

B. 1.00

C. 1.10

D. 1.22

E. 1.33

 Therearethreestocks,A,B,andC.Youcaneitherinvestinthesestocksorshortsellthem.Therearethreepossiblestatesofnatureforeconomicgrowthintheupcomingyear;economicgrowthmaybestrong,moderate,orweak.ThereturnsfortheupcomingyearonstocksA,B,andCforeachofthesestatesofnaturearegivenbelow:

25. IfyouinvestedinanequallyweightedportfolioofstocksAandB,yourportfolioreturnwouldbe___________ifeconomicgrowthweremoderate. 

A. 3.0%

B. 14.5%

C. 15.5%

D. 16.0%

E. 17.0%

26. IfyouinvestedinanequallyweightedportfolioofstocksAandC,yourportfolioreturnwouldbe____________ifeconomicgrowthwasstrong. 

A. 17.0%

B. 22.5%

C. 30.0%

D. 30.5%

E. 25.6%

27. IfyouinvestedinanequallyweightedportfolioofstocksBandC,yourportfolioreturnwouldbe_____________ifeconomicgrowthwasweak. 

A. −2.5%

B. 0.5%

C. 3.0%

D. 11.0%

E. 9.0%

28. Ifyouwantedtotakeadvantageofarisk-freearbitrageopportunity,youshouldtakeashortpositionin_________andalongpositioninanequallyweightedportfolioof_______. 

A. A;BandC

B. B;AandC

C. C;AandB

D. AandB;C

E. Noarbitrageopportunityexists.

 ConsiderthemultifactorAPT.Therearetwoindependenteconomicfactors,F1andF2.Therisk-freerateofreturnis6%.Thefollowinginformationisavailableabouttwowell-diversifiedportfolios:

29. Assumingnoarbitrageopportunitiesexist,theriskpremiumonthefactorF1portfolioshouldbe__________. 

A. 3%

B. 4%

C. 5%

D. 6%

E. 2%

30. Assumingnoarbitrageopportunitiesexist,theriskpremiumonthefactorF2portfolioshouldbe___________. 

A. 3%

B. 4%

C. 5%

D. 6%

E. 2%

31. Azero-investmentportfoliowithapositiveexpectedreturnariseswhen_________. 

A. aninvestorhasdownsideriskonly

B. thelawofpricesisnotviolated

C. theopportunitysetisnottangenttothecapitalallocationline

D. arisk-freearbitrageopportunityexists

E. arisk-freearbitrageopportunitydoesnotexist

32. Aninvestorwilltakeaslargeapositionaspossiblewhenanequilibriumpricerelationshipisviolated.Thisisanexampleof_________. 

A. adominanceargument

B. themean-varianceefficiencyfrontier

C. arisk-freearbitrage

D. thecapitalassetpricingmodel

E. theSML

33. TheAPTdiffersfromtheCAPMbecausetheAPT_________. 

A. placesmoreemphasisonmarketrisk

B. mini