Exam 10: Risk and Return: the Capital Asset Pricing Model

The portfolio expected return considers which of the following factors? I.the amount of money currently invested in each individual security. II)various levels of economic activity. III)the performance of each share given various economic scenarios. IV)the probability of various states of the economy.

The equity of Martin Industries has a beta of 1.43.The risk-free rate of return is 3.6% and the market risk premium is 9%.What is the expected rate of return on Martin Industries share?

According to the CAPM, the expected return on a risky asset depends on three components. Describe each component, and explain its role in determining expected return.

If the economy booms, RTF AB equity is expected to return 10%.If the economy goes into a recessionary period, then RTF is expected to only return 4%.The probability of a boom is 60% while The probability of a recession is 40%.What is the variance of the returns on RTF?

A portfolio contains four assets.Asset 1 has a beta of .8 and comprises 30% of the portfolio.Asset 2 has a beta of 1.1 and comprises 30% of the portfolio.Asset 3 has a beta of 1.5 and comprises 20% of The portfolio.Asset 4 has a beta of 1.6 and comprises the remaining 20% of the portfolio.If the Riskless rate is expected to be 3% and the market risk premium is 6%, what is the beta of the Portfolio?

Your portfolio is comprised of 30% of share X, 50% of share Y, and 20% of share Z.Share X has a beta of .64, share Y has a beta of 1.48, and share Z has a beta of 1.04.What is the beta of your Portfolio?

The systematic risk of the market is measured by:

The diversification effect of a portfolio of two shares:

The equity of Flavorful Teas has an expected return of 14.4%.The return on the market is 10% and the risk-free rate of return is 3.5%.What is the beta?

When computing the expected return on a portfolio of shares the portfolio weights are based on the:

The beta of a security is calculated by:

The dominant portfolio with the lowest possible risk is:

The measure of beta associates most closely with:

Total risk can be divided into:

Standard deviation measures _____ risk.

What is the standard deviation of a portfolio that is invested 40% in share Q and 60% in share R?

A share with a beta of zero would be expected to have a rate of return equal to:

A portfolio is:

Kurt's Adventures SA equity is quite cyclical.In a boom economy, the equity is expected to return 30% in comparison to 12% in a normal economy and a negative 20% in a recessionary period.The Probability of a recession is 15%.There is a 30% chance of a boom economy.The remainder of the Time, the economy will be at normal levels.What is the standard deviation of the returns on Kurt's Adventures SA?

If investors possess homogeneous expectations over all assets in the market portfolio, when riskless lending and borrowing is allowed, the market portfolio is defined to: