Exam 12: An Alternative View of Risk and Return: the Arbitrage Pricing Theory

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Calculate the stock's total return if the company announces that an important patent filing has been granted sooner than expected and will earn the company 5% more in return.

(Multiple Choice)

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Question 21

A factor is a variable that:

(Multiple Choice)

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Question 22

Suppose the JumpStart Corporation's common stock has a beta of 0.8.If the risk-free rate is 4% and the expected market return is 9%, the expected return for JumpStart's common stock is:

(Multiple Choice)

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Question 23

Which of the following statements is/are true?

(Multiple Choice)

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Question 24

In the one factor (APT) model, the characteristic line to estimate $\beta$ i passes through the origin, unlike the estimate used in the CAPM because:

(Multiple Choice)

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Question 25

A growth stock portfolio and a value portfolio might be characterized:

(Multiple Choice)

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Question 26

Parametric or empirical models rely on:

(Multiple Choice)

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Question 27

Which of the following is true about the impact on market price of a security when a company makes an announcement and the market has discounted the news?

(Multiple Choice)

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Question 28

A value company is defined as one that:

(Multiple Choice)

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Question 29

If company A, a medical research company, makes a new product discovery and their stock rises 5%, this will have:

(Multiple Choice)

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Question 30

Assuming that the single factor APT model applies, the beta for the market portfolio is:

(Multiple Choice)

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Question 31

If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, $\beta$ _I, would result in a change in any security return of ___ $\beta$ _I.

(Multiple Choice)

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Question 32

The Fama-French three factor model predicts the expected return on a portfolio increases:

(Multiple Choice)

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Question 33

Style portfolios are characterized by:

(Multiple Choice)

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Question 34

An investor is considering the three stocks given below: A 6.0\% -0.10 B 13.3\% 2.10 C 9.2\% .75 Market Portfolio 10.0\% 1.00 T-Bills 7.0\% 0.00 Calculate the expected return and beta of a portfolio equally weighted between stocks B and C.Demonstrate that holding stock A actually reduces risk by comparing the risk of a portfolio equally weighted between stock B and T-Bills with a portfolio equally weighted between stocks B and A.

(Essay)

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Question 35

Three factors likely to occur in the APT model are:

(Multiple Choice)

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Question 36

What would the stock's total return be if the actual growth in each of the factors was equal to growth expected? Assume no unexpected news on the patent.

(Multiple Choice)

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Question 37

An advantage of the APT over CAPM is:

(Multiple Choice)

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Question 38

The acronym CAPM stands for:

(Multiple Choice)

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Question 39

Suppose the MiniCD Corporation's common stock has a return of 12%.Assume the risk-free rate is 4%, the expected market return is 9%, and no unsystematic influence affected Mini's return.The beta for MiniCD is:

(Multiple Choice)

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Question 40

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Exam 12: An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Calculate the stock's total return if the company announces that an important patent filing has been granted sooner than expected and will earn the company 5% more in return.

A factor is a variable that:

Suppose the JumpStart Corporation's common stock has a beta of 0.8.If the risk-free rate is 4% and the expected market return is 9%, the expected return for JumpStart's common stock is:

Which of the following statements is/are true?

In the one factor (APT) model, the characteristic line to estimate β\betaβ i passes through the origin, unlike the estimate used in the CAPM because:

A growth stock portfolio and a value portfolio might be characterized:

Parametric or empirical models rely on:

Which of the following is true about the impact on market price of a security when a company makes an announcement and the market has discounted the news?

A value company is defined as one that:

If company A, a medical research company, makes a new product discovery and their stock rises 5%, this will have:

Assuming that the single factor APT model applies, the beta for the market portfolio is:

If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, β\betaβ I, would result in a change in any security return of ___ β\betaβ I.

The Fama-French three factor model predicts the expected return on a portfolio increases:

Style portfolios are characterized by:

Three factors likely to occur in the APT model are:

What would the stock's total return be if the actual growth in each of the factors was equal to growth expected? Assume no unexpected news on the patent.

An advantage of the APT over CAPM is:

The acronym CAPM stands for:

Suppose the MiniCD Corporation's common stock has a return of 12%.Assume the risk-free rate is 4%, the expected market return is 9%, and no unsystematic influence affected Mini's return.The beta for MiniCD is:

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Long-Term Planning

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return: Lessons From Market History

Return and Risk: the Capital Asset Pricing Model

Risk, Cost of Capital, and Capital Budgeting

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing: an Introduction

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Issuing Securities to the Public

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers and Acquisitions

Financial Distress

International Corporate Finance

Filters

In the one factor (APT) model, the characteristic line to estimate $\beta$ i passes through the origin, unlike the estimate used in the CAPM because:

If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, $\beta$ _I, would result in a change in any security return of ___ $\beta$ _I.