Consider the multifactor APT.There are two independent economic factors,F1 and F2.The risk-free rate of return is 6%.The following information is available about two well-diversified portfolios: \[\begin{array}{l} \begin{array} { l l l l } \text { portfolio}&\beta \text { on F?}&\beta \text { on F?}&\text { expected return}\\ A&1.0&2.0&19\%\\ B&2.0&0.0&12\% \end{array} \end{array}\] Assuming no arbitrage opportunities exist,the risk premium on the factor F2 portfolio should be ___________.

A) 3% B) 4% C) 5% D) 6% E) none of these A) 3% B) 4% C) 5% D) 6% E) none of these

The index model for stock B has been estimated with the following result: RB = 0.01 + 1.1RM + eB If σM = 0.20 and R2B = 0.50,the standard deviation of the return on stock B is _________.

A) 0.1111 B) 0.2111 C) 0.3111 D) 0.4111 E) none of these A) 0.1111 B) 0.2111 C) 0.3111 D) 0.4111 E) none of these

Consider the multifactor APT.There are two independent economic factors,F1 and F2.The risk-free rate of return is 6%.The following information is available about two well-diversified portfolios: \[\begin{array}{l} \begin{array} { l l l l } \text { portfolio}&\beta \text { on F?}&\beta \text { on F?}&\text { expected return}\\ A&1.0&2.0&19\%\\ B&2.0&0.0&12\% \end{array} \end{array}\] Assuming no arbitrage opportunities exist,the risk premium on the factor F1 portfolio should be __________.

A) 3% B) 4% C) 5% D) 6% E) none of these A) 3% B) 4% C) 5% D) 6% E) none of these

Exam 8: The Efficient Market Hypothesis

Consider the one-factor APT.Assume that two portfolios,A and B,are well diversified.The betas of portfolios A and B are 1.0 and 1.5,respectively.The expected returns on portfolios A and B are 19% and 24%,respectively.Assuming no arbitrage opportunities exist,the risk-free rate of return must be ____________.

(Multiple Choice)

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Question 61

Consider the single factor APT.Portfolios A and B have expected returns of 14% and 18%,respectively.The risk-free rate of return is 7%.Portfolio A has a beta of 0.7.If arbitrage opportunities are ruled out,portfolio B must have a beta of __________.

(Multiple Choice)

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Question 62

In terms of the risk/return relationship

(Multiple Choice)

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Question 63

Consider the multifactor APT.There are two independent economic factors,F₁ and F₂.The risk-free rate of return is 6%.The following information is available about two well-diversified portfolios: portfolio \beta on F? \beta on F? expected return A 1.0 2.0 19\% B 2.0 0.0 12\% Assuming no arbitrage opportunities exist,the risk premium on the factor F₂ portfolio should be ___________.

(Multiple Choice)

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Question 64

The provides an unequivocal statement on the expected return-beta relationship for all assets,whereas the _ implies that this relationship holds for all but perhaps a small number of securities.

(Multiple Choice)

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Question 65

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 investments.They will need to calculate ___ expected returns and _ variances of returns.

(Multiple Choice)

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Question 66

Discuss the advantages of arbitrage pricing theory (APT)over the capital asset pricing model (CAPM)relative to diversified portfolios.

(Essay)

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Question 67

The index model has been estimated for stocks A and B with the following results: R_A = 0.01 + 0.8R_M + e_A R_B = 0.02 + 1.2R_M + e_B Σ_M = 0.20 σ(e_A)= 0.20 σ(e_B)= 0.10 The standard deviation for stock A is __________.

(Multiple Choice)

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Question 68

The Security Risk Evaluation book published by Merrill Lynch relies on the _________ most recent monthly observations to calculate regression parameters.

(Multiple Choice)

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Question 69

The index model for stock B has been estimated with the following result: R_B = 0.01 + 1.1R_M + e_B If σ_M = 0.20 and R²_B = 0.50,the standard deviation of the return on stock B is _________.

(Multiple Choice)

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Question 70

The idea that there is a limit to the reduction of portfolio risk due to diversification is

(Multiple Choice)

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Question 71

Which of the following is true about the security market line (SML)derived from the APT?

(Multiple Choice)

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Question 72

The CAPM assumes that the only relevant source of risk arises from

(Multiple Choice)

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Question 73

Consider the multifactor APT.There are two independent economic factors,F₁ and F₂.The risk-free rate of return is 6%.The following information is available about two well-diversified portfolios: portfolio \beta on F? \beta on F? expected return A 1.0 2.0 19\% B 2.0 0.0 12\% Assuming no arbitrage opportunities exist,the risk premium on the factor F₁ portfolio should be __________.

(Multiple Choice)

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Question 74

Consider the multifactor model APT with two factors.Portfolio A has a beta of 0.75 on factor 1 and a beta of 1.25 on factor 2.The risk premiums on the factor 1 and factor 2 portfolios are 1% and 7%,respectively.The risk-free rate of return is 7%.The expected return on portfolio A is __________ if no arbitrage opportunities exist.

(Multiple Choice)

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Question 75

A professional who searches for mispriced securities in specific areas such as merger-target stocks,rather than one who seeks strict (risk-free)arbitrage opportunities is engaged in

(Multiple Choice)

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Question 76

A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.

(Multiple Choice)

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Question 77

Consider the multifactor APT.The risk premiums on the factor 1 and factor 2 portfolios are 5% and 3%,respectively.The risk-free rate of return is 10%.Stock A has an expected return of 19% and a beta on factor 1 of 0.8.Stock A has a beta on factor 2 of ________.

(Multiple Choice)

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Question 78

Suppose the following equation best describes the evolution of β over time: Βt= 0.25 + 0.75βt-1 If a stock had a β of 0.6 last year,you would forecast the β to be _______ in the coming year.

(Multiple Choice)

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Question 79

Which pricing model provides no guidance concerning the determination of the risk premium on factor portfolios?

(Multiple Choice)

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Question 80

Showing 61 - 80 of 99

Consider the single factor APT.Portfolios A and B have expected returns of 14% and 18%,respectively.The risk-free rate of return is 7%.Portfolio A has a beta of 0.7.If arbitrage opportunities are ruled out,portfolio B must have a beta of __________.

In terms of the risk/return relationship

The provides an unequivocal statement on the expected return-beta relationship for all assets,whereas the _ implies that this relationship holds for all but perhaps a small number of securities.

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 investments.They will need to calculate ___ expected returns and _ variances of returns.

Discuss the advantages of arbitrage pricing theory (APT)over the capital asset pricing model (CAPM)relative to diversified portfolios.

The index model has been estimated for stocks A and B with the following results: R_A = 0.01 + 0.8R_M + e_A R_B = 0.02 + 1.2R_M + e_B Σ_M = 0.20 σ(e_A)= 0.20 σ(e_B)= 0.10 The standard deviation for stock A is __________.

The Security Risk Evaluation book published by Merrill Lynch relies on the _________ most recent monthly observations to calculate regression parameters.

The index model for stock B has been estimated with the following result: R_B = 0.01 + 1.1R_M + e_B If σ_M = 0.20 and R²_B = 0.50,the standard deviation of the return on stock B is _________.

The idea that there is a limit to the reduction of portfolio risk due to diversification is

Which of the following is true about the security market line (SML)derived from the APT?

The CAPM assumes that the only relevant source of risk arises from

A professional who searches for mispriced securities in specific areas such as merger-target stocks,rather than one who seeks strict (risk-free)arbitrage opportunities is engaged in

A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.

Consider the multifactor APT.The risk premiums on the factor 1 and factor 2 portfolios are 5% and 3%,respectively.The risk-free rate of return is 10%.Stock A has an expected return of 19% and a beta on factor 1 of 0.8.Stock A has a beta on factor 2 of ________.

Suppose the following equation best describes the evolution of β over time: Βt= 0.25 + 0.75βt-1 If a stock had a β of 0.6 last year,you would forecast the β to be _______ in the coming year.

Which pricing model provides no guidance concerning the determination of the risk premium on factor portfolios?

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

International Finance and Investments: Understanding Foreign Markets and Risks

Filters

Exam 8: The Efficient Market Hypothesis

Consider the single factor APT.Portfolios A and B have expected returns of 14% and 18%,respectively.The risk-free rate of return is 7%.Portfolio A has a beta of 0.7.If arbitrage opportunities are ruled out,portfolio B must have a beta of __________.

In terms of the risk/return relationship

The ____________ provides an unequivocal statement on the expected return-beta relationship for all assets,whereas the _____________ implies that this relationship holds for all but perhaps a small number of securities.

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 investments.They will need to calculate _____________ expected returns and ___________ variances of returns.

Discuss the advantages of arbitrage pricing theory (APT)over the capital asset pricing model (CAPM)relative to diversified portfolios.

The index model has been estimated for stocks A and B with the following results: RA = 0.01 + 0.8RM + eA RB = 0.02 + 1.2RM + eB ΣM = 0.20 σ(eA)= 0.20 σ(eB)= 0.10 The standard deviation for stock A is __________.

The Security Risk Evaluation book published by Merrill Lynch relies on the _________ most recent monthly observations to calculate regression parameters.

The index model for stock B has been estimated with the following result: RB = 0.01 + 1.1RM + eB If σM = 0.20 and R2B = 0.50,the standard deviation of the return on stock B is _________.

The idea that there is a limit to the reduction of portfolio risk due to diversification is

Which of the following is true about the security market line (SML)derived from the APT?

The CAPM assumes that the only relevant source of risk arises from

A professional who searches for mispriced securities in specific areas such as merger-target stocks,rather than one who seeks strict (risk-free)arbitrage opportunities is engaged in

A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.

Consider the multifactor APT.The risk premiums on the factor 1 and factor 2 portfolios are 5% and 3%,respectively.The risk-free rate of return is 10%.Stock A has an expected return of 19% and a beta on factor 1 of 0.8.Stock A has a beta on factor 2 of ________.

Suppose the following equation best describes the evolution of β over time: Βt= 0.25 + 0.75βt-1 If a stock had a β of 0.6 last year,you would forecast the β to be _______ in the coming year.

Which pricing model provides no guidance concerning the determination of the risk premium on factor portfolios?

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

International Finance and Investments: Understanding Foreign Markets and Risks

Filters

The provides an unequivocal statement on the expected return-beta relationship for all assets,whereas the _ implies that this relationship holds for all but perhaps a small number of securities.

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 investments.They will need to calculate ___ expected returns and _ variances of returns.

The index model has been estimated for stocks A and B with the following results: R_A = 0.01 + 0.8R_M + e_A R_B = 0.02 + 1.2R_M + e_B Σ_M = 0.20 σ(e_A)= 0.20 σ(e_B)= 0.10 The standard deviation for stock A is __________.

The index model for stock B has been estimated with the following result: R_B = 0.01 + 1.1R_M + e_B If σ_M = 0.20 and R²_B = 0.50,the standard deviation of the return on stock B is _________.