Exam 12: Behavioral Finance and Technical Analysis

A security has an expected rate of return of 0.15 and a beta of 1.25.The market expected rate of return is 0.10 and the risk-free rate is 0.04.The alpha of the stock is

For the CAPM that examines illiquidity premiums,if there is correlation among assets due to common systematic risk factors,the illiquidity premium on asset i is a function of

The Security Market Line (SML)is

For the CAPM that examines illiquidity premiums,if there is correlation among assets due to common systematic risk factors,the illiquidity premium on asset i is a function of

In equilibrium,the marginal price of risk for a risky security must be

Assume that a security is fairly priced and has an expected rate of return of 0.13.The market expected rate of return is 0.13 and the risk-free rate is 0.04.The beta of the stock is ___.

Capital Asset Pricing Theory asserts that portfolio returns are best explained by:

What is the expected return of a zero-beta security?

Which statement is not true regarding the Capital Market Line (CML)?

Discuss the mutual fund theorem.

According to the Capital Asset Pricing Model (CAPM),which one of the following statements is false?

The market risk,beta,of a security is equal to

The capital asset pricing model assumes

In a well diversified portfolio

The risk-free rate is 4 percent.The expected market rate of return is 11 percent.If you expect CAT with a beta of 1.0 to offer a rate of return of 10 percent,you should

Discuss how the CAPM might be used in capital budgeting decisions and utility rate decisions.

As a financial analyst,you are tasked with evaluating a capital budgeting project.You were instructed to use the IRR method and you need to determine an appropriate hurdle rate.The risk-free rate is 4 percent and the expected market rate of return is 11 percent.Your company has a beta of 1.4 and the project that you are evaluating is considered to have risk equal to the average project that the company has accepted in the past.According to CAPM,the appropriate hurdle rate would be ______%.

According to the Capital Asset Pricing Model (CAPM)a well diversified portfolio's rate of return is a function of

Your opinion is that security C has an expected rate of return of 0.106.It has a beta of 1.1.The risk-free rate is 0.04 and the market expected rate of return is 0.10.According to the Capital Asset Pricing Model,this security is

A security has an expected rate of return of 0.15 and a beta of 1.25.The market expected rate of return is 0.10 and the risk-free rate is 0.04.The alpha of the stock is