Question 1

To estimate the cost of equity capital for a firm using the CAPM, it is necessary to have:

Accepted Answer

A) company financial leverage, beta, and the market risk premium. 
B) company financial leverage, beta, and the risk-free rate. 
C) beta, company financial leverage, and the industry beta. 
D) beta, company financial leverage, and the market risk premium. 
E) beta, the risk-free rate, and the market risk premium. 
A) company financial leverage, beta, and the market risk premium. 
B) company financial leverage, beta, and the risk-free rate. 
C) beta, company financial leverage, and the industry beta. 
D) beta, company financial leverage, and the market risk premium. 
E) beta, the risk-free rate, and the market risk premium.

Question 2

The betas along with the factors in the APT adjust the expected return for:

Accepted Answer

A) calculation errors. 
B) unsystematic risks. 
C) spurious correlations of factors. 
D) differences between actual and expected levels of factors. 
E) All of the above. 
A) calculation errors. 
B) unsystematic risks. 
C) spurious correlations of factors. 
D) differences between actual and expected levels of factors. 
E) All of the above.

Question 3

For a diversified portfolio including a large number of stocks, the:

Accepted Answer

A) weighted average expected return goes to zero. 
B) weighted average of the betas goes to zero. 
C) weighted average of the unsystematic risk goes to zero. 
D) return of the portfolio goes to zero. 
E) return on the portfolio equals the risk-free rate. 
A) weighted average expected return goes to zero. 
B) weighted average of the betas goes to zero. 
C) weighted average of the unsystematic risk goes to zero. 
D) return of the portfolio goes to zero. 
E) return on the portfolio equals the risk-free rate.

Question 4

Which of the following statements is true?

Accepted Answer

A) A well-diversified portfolio has negligible systematic risk. 
B) A well-diversified portfolio has negligible unsystematic risk. 
C) An individual security has negligible systematic risk. 
D) An individual security has negligible unsystematic risk. 
E) Both A and D. 
A) A well-diversified portfolio has negligible systematic risk. 
B) A well-diversified portfolio has negligible unsystematic risk. 
C) An individual security has negligible systematic risk. 
D) An individual security has negligible unsystematic risk. 
E) Both A and D.

Question 5

The Fama-French three factor model includes the following factors:

Accepted Answer

A) beta, expected return on the market, risk free rate of interest, a size factor, and a value factor. 
B) the market risk premium, a volume factor, and a size factor. 
C) beta, expected return on the market, risk free rate of interest, a volume factor, and a value factor. 
D) the yield on corporate bonds, a size factor, and a market factor. 
E) None of the above. 
A) beta, expected return on the market, risk free rate of interest, a size factor, and a value factor. 
B) the market risk premium, a volume factor, and a size factor. 
C) beta, expected return on the market, risk free rate of interest, a volume factor, and a value factor. 
D) the yield on corporate bonds, a size factor, and a market factor. 
E) None of the above.

Question 6

Discuss the Fama-French three factor model; both what it means and the factors of the model.

Accepted Answer

The Fama-French (1993) three factor mode

Question 7

Systematic risk is defined as:

Accepted Answer

A) a risk that specifically affects an asset or small group of assets. 
B) any risk that affects a large number of assets. 
C) any risk that has a huge impact on the return of a security. 
D) the random component of return. 
E) None of the above. 
A) a risk that specifically affects an asset or small group of assets. 
B) any risk that affects a large number of assets. 
C) any risk that has a huge impact on the return of a security. 
D) the random component of return. 
E) None of the above.

To estimate the cost of equity capital for a firm using the CAPM, it is necessary to have:

The betas along with the factors in the APT adjust the expected return for:

For a diversified portfolio including a large number of stocks, the:

Which of the following statements is true?

The Fama-French three factor model includes the following factors:

Discuss the Fama-French three factor model; both what it means and the factors of the model.

Systematic risk is defined as:

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

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

To estimate the cost of equity capital for a firm using the CAPM, it is necessary to have:

The betas along with the factors in the APT adjust the expected return for:

For a diversified portfolio including a large number of stocks, the:

Which of the following statements is true?

The Fama-French three factor model includes the following factors:

Discuss the Fama-French three factor model; both what it means and the factors of the model.

Systematic risk is defined as:

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