Exhibit 8.3 Use the Information Below for the Following Problem(S) \[\begin{array} { c c c c } \text { Periad } & \begin{array} { c } \text { Return } \\ \text { of Radtran } \\ \text { (Percent) } \end{array} & \begin{array} { c } \text { Praxy } \\ \text { Epecific Index } \\ \text { (Percent) } \end{array} & \begin{array} { c } \text { True } \\ \text { Ceneral Index } \\ \text { (Percent) } \end{array} \\ \hline 1 & 10 & 12 & 15 \\ 2 & 12 & 10 & 13 \\ 3 & - 10 & - 8 & - 8 \\ 4 & - 4 & - 10 & 0 \end{array}\] -Refer to Exhibit 8.3.What is the beta for Radtron using the proxy index?

A) 0.87 B) 0.97 C) 1.02 D) 1.15 E) 1.28 A) 0.87 B) 0.97 C) 1.02 D) 1.15 E) 1.28

Exhibit 8.2 Use the Information Below for the Following Problem(S) You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks. \[\begin{array} { c c c c c } \text { Stack } & \text { Eeta } & \begin{array} { c } \text { Current } \\ \text { Price } \end{array} & \begin{array} { c } \text { Expected } \\ \text { Price } \end{array} & \begin{array} { c } \text { Experted } \\ \text { Dividend } \end{array} \\ \hline \mathbf { X } & 1.25 & \$ 20 & \$ 23 & \$ 1.25 \\ \mathbf { Y } & 1.50 & \$ 27 & \$ 29 & \$ 0.25 \\ \mathbf { Z } & 0.90 & \$ 35 & \$ 38 & \$ 1.00 \end{array}\] -Refer to Exhibit 8.2.What is your investment strategy concerning the three stocks?

A) Buy X and Y, sell Z. B) Sell X, Y and Z. C) Sell X and Z, buy Y. D) Buy X, Y and Z. E) Buy X and Z, sell Y. A) Buy X and Y, sell Z. B) Sell X, Y and Z. C) Sell X and Z, buy Y. D) Buy X, Y and Z. E) Buy X and Z, sell Y.

Exhibit 8.3 Use the Information Below for the Following Problem(S) \[\begin{array} { c c c c } \text { Periad } & \begin{array} { c } \text { Return } \\ \text { of Radtran } \\ \text { (Percent) } \end{array} & \begin{array} { c } \text { Praxy } \\ \text { Epecific Index } \\ \text { (Percent) } \end{array} & \begin{array} { c } \text { True } \\ \text { Ceneral Index } \\ \text { (Percent) } \end{array} \\ \hline 1 & 10 & 12 & 15 \\ 2 & 12 & 10 & 13 \\ 3 & - 10 & - 8 & - 8 \\ 4 & - 4 & - 10 & 0 \end{array}\] -Refer to Exhibit 8.3.The average return for Radtron is

A) 1% B) 2% C) 3% D) 4% E) 5% A) 1% B) 2% C) 3% D) 4% E) 5%

Exhibit 8.4 Use the Information Below for the Following Problem(S) \[\begin{array} { c c c c c } \text { Stack } & \text { Beta } & \text { Current Prica } & \text { Expertad Prica } & \text { Expertad Dividend } \\ \hline \mathbf { X } & { [ .8 } & \$ 12.50 & \$ 13.10 & \$ 0.80 \\ Y & 1.1 & \$ 2.25 & 9.76 & \$ 0.20 \\ Z & 2.1 & \$ 25.70 & \$ 30.04 & \$ 0.00 \end{array}\] -Refer to Exhibit 8.4.If the expected return on the market is 11.5% and the risk-free rate of return is 4.5%,then what are the required rates of return for stocks X,Y,and Z based on the CAPM? &ensp;&ensp;&ensp;&ensp;X&ensp;&ensp; &ensp;Y &ensp;&ensp;&ensp;&ensp;&ensp;Z

A) 4.8% &ensp;18.3% 16.9% B) 7.2% &ensp;20.7%&ensp; 22.3% C) 10.7% &ensp;17.5% &ensp;14.4% D) 10.1%&ensp; 12.2% &ensp;19.2% E) 11.1% &ensp;12.2% &ensp;21.3% A) 4.8% &ensp;18.3% 16.9% B) 7.2% &ensp;20.7%&ensp; 22.3% C) 10.7% &ensp;17.5% &ensp;14.4% D) 10.1%&ensp; 12.2% &ensp;19.2% E) 11.1% &ensp;12.2% &ensp;21.3%

Exam 8: An Introduction to Asset Pricing Models

Exhibit 8.3 Use the Information Below for the Following Problem(S) Periad Return of Radtran (Percent) Praxy Epecific Index (Percent) True Ceneral Index (Percent) 1 10 12 15 2 12 10 13 3 -10 -8 -8 4 -4 -10 0 -Refer to Exhibit 8.3.What is the beta for Radtron using the proxy index?

(Multiple Choice)

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Question 41

An investor constructs a portfolio with a 75% allocation to a stock index and a 25% allocation to a risk free asset.The expected returns on the risk-free asset and the stock index are 3% and 10%,respectively.The standard deviation of returns on the stock index is 14%.Calculate the expected standard deviation of the portfolio.

(Multiple Choice)

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Question 42

Since many of the assumptions made by the capital market theory are unrealistic,the theory is not applicable in the real world.

(True/False)

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Question 43

Which of the following is not an assumption of the Capital Market Theory?

(Multiple Choice)

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Question 44

The the number of stocks in a portfolio and the the time period the the portfolio beta.

(Multiple Choice)

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Question 45

Tobin's separation theory states that the market is a separate investment from the risk-free security.

(True/False)

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Question 46

Exhibit 8.2 Use the Information Below for the Following Problem(S) You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks. Stack Eeta Current Price Expected Price Experted Dividend 1.25 \ 20 \ 23 \ 1.25 1.50 \ 27 \ 29 \ 0.25 0.90 \ 35 \ 38 \ 1.00 -Refer to Exhibit 8.2.What is your investment strategy concerning the three stocks?

(Multiple Choice)

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Question 47

Exhibit 8.6 Use the Information Below for the Following Problem(S) Jonathan Crowley is a portfolio manager for a large pension fund. Last year his portfolio had an actual return of 12.6% with a standard deviation of 13% and a beta of 1.3. The market risk premium for this period of time was 6% and the risk-free rate of return was 5%. -Refer to Exhibit 8.6.How does Jonathan Crowley's portfolio compare to the market portfolio?

(Multiple Choice)

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Question 48

A friend has information that the stock of Zip Incorporated is going to rise from $62.00 to $65.00 per share over the next year.You know that the annual return on the S&P 500 has been 10% and the 90-day T-bill rate has been yielding 6% per year over the past 10 years.If beta for Zip is 0.9,will you purchase the stock?

(Multiple Choice)

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Question 49

Exhibit 8.3 Use the Information Below for the Following Problem(S) Periad Return of Radtran (Percent) Praxy Epecific Index (Percent) True Ceneral Index (Percent) 1 10 12 15 2 12 10 13 3 -10 -8 -8 4 -4 -10 0 -Refer to Exhibit 8.3.The average return for Radtron is

(Multiple Choice)

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Question 50

Since the market portfolio is reasonable in theory,it is easy to implement when testing or using the CAPM.

(True/False)

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Question 51

The market portfolio consists of all risky assets.

(True/False)

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Question 52

Exhibit 8.4 Use the Information Below for the Following Problem(S) Stack Beta Current Prica Expertad Prica Expertad Dividend [.8 \ 12.50 \ 13.10 \ 0.80 Y 1.1 \ 2.25 9.76 \ 0.20 Z 2.1 \ 25.70 \ 30.04 \ 0.00 -Refer to Exhibit 8.4.If the expected return on the market is 11.5% and the risk-free rate of return is 4.5%,then what are the required rates of return for stocks X,Y,and Z based on the CAPM? X Y Z

(Multiple Choice)

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Question 53

The expected return for a stock,calculated using the CAPM,is 10.5%.The market return is 9.5% and the beta of the stock is 1.50.Calculate the implied risk-free rate.

(Multiple Choice)

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Question 54

Assume the risk-free rate is 4.5% and the expected return on the market is 11%.You anticipate Stock XYZ to sell for $28 at the end of next year and pay a dividend of $2.The stock is currently selling for $26.50 with a beta of 1.2.You currently hold stock XYZ in a well-diversified portfolio.Assuming you have money to invest,you should:

(Multiple Choice)

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Question 55

The only way to estimate a beta for a security is to calculate the covariance of the security with the market.

(True/False)

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Question 56

Studies have shown that a well-diversified investor needs as few as five stocks.

(True/False)

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Question 57

The Efficient Frontier refers to a set of portfolios that

(Multiple Choice)

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Question 58

Calculate the expected return for D Industries which has a beta of 1.0 when the risk free rate is 0.03 and you expect the market return to be 0.13.

(Multiple Choice)

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Question 59

Utilizing the security market line an investor owning a stock with a beta of -2 would expect the stock's return to ____ in a market that was expected to decline 15 percent.

(Multiple Choice)

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Question 60

Exam 8: An Introduction to Asset Pricing Models

Exhibit 8.3 Use the Information Below for the Following Problem(S) Periad Return of Radtran (Percent) Praxy Epecific Index (Percent) True Ceneral Index (Percent) 1 10 12 15 2 12 10 13 3 -10 -8 -8 4 -4 -10 0 -Refer to Exhibit 8.3.What is the beta for Radtron using the proxy index?

Since many of the assumptions made by the capital market theory are unrealistic,the theory is not applicable in the real world.

Which of the following is not an assumption of the Capital Market Theory?

The ____ the number of stocks in a portfolio and the ____ the time period the ____ the portfolio beta.

Tobin's separation theory states that the market is a separate investment from the risk-free security.

Exhibit 8.3 Use the Information Below for the Following Problem(S) Periad Return of Radtran (Percent) Praxy Epecific Index (Percent) True Ceneral Index (Percent) 1 10 12 15 2 12 10 13 3 -10 -8 -8 4 -4 -10 0 -Refer to Exhibit 8.3.The average return for Radtron is

Since the market portfolio is reasonable in theory,it is easy to implement when testing or using the CAPM.

The market portfolio consists of all risky assets.

The expected return for a stock,calculated using the CAPM,is 10.5%.The market return is 9.5% and the beta of the stock is 1.50.Calculate the implied risk-free rate.

The only way to estimate a beta for a security is to calculate the covariance of the security with the market.

Studies have shown that a well-diversified investor needs as few as five stocks.

The Efficient Frontier refers to a set of portfolios that

Calculate the expected return for D Industries which has a beta of 1.0 when the risk free rate is 0.03 and you expect the market return to be 0.13.

Utilizing the security market line an investor owning a stock with a beta of -2 would expect the stock's return to ____ in a market that was expected to decline 15 percent.

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

Filters

The the number of stocks in a portfolio and the the time period the the portfolio beta.