Exam 7: Capital Asset Pricing and Arbitrage Pricing Theory

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The risk-free rate and the expected market rate of return are 6% and 16% respectively.According to the capital asset pricing model,the expected rate of return on security X with a beta of 1.2 is equal to _________.

(Multiple Choice)

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Question 81

In a single factor market model the beta of a stock ________.

(Multiple Choice)

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Question 82

Security A has an expected rate of return of 12% and a beta of 1.10.The market expected rate of return is 8% and the risk-free rate is 5%.The alpha of the stock is _________.

(Multiple Choice)

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Question 83

Consider the one-factor APT.The standard deviation of return on a well-diversified portfolio is 20%.The standard deviation on the factor portfolio is 12%.The beta of the well-diversified portfolio is approximately _________.

(Multiple Choice)

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Question 84

There are two independent economic factors M1 and M2.The risk-free rate is 5% and all stocks have independent firm-specific components with a standard deviation of 25%.Portfolios A and B are well diversified.Given the data below which equation provides the correct pricing model?

(Multiple Choice)

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Question 85

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The risk-free rate and the expected market rate of return are 6% and 16% respectively.According to the capital asset pricing model,the expected rate of return on security X with a beta of 1.2 is equal to _________.

In a single factor market model the beta of a stock ________.

Security A has an expected rate of return of 12% and a beta of 1.10.The market expected rate of return is 8% and the risk-free rate is 5%.The alpha of the stock is _________.

Consider the one-factor APT.The standard deviation of return on a well-diversified portfolio is 20%.The standard deviation on the factor portfolio is 12%.The beta of the well-diversified portfolio is approximately _________.

There are two independent economic factors M1 and M2.The risk-free rate is 5% and all stocks have independent firm-specific components with a standard deviation of 25%.Portfolios A and B are well diversified.Given the data below which equation provides the correct pricing model?

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