2023年投资学新版题库

Chapter 09The Capital Asset Pricing ModelMultiple Choice Questions1.In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of risk isA.unique risk.B.beta.C.standard deviation of returns.D.variance of returns.2.In the context of the Capital Asset Pricing Model (CAPM) the relevant risk isA.unique risk.B.systematic risk.C.standard deviation of returns.D.variance of returns.3.In the context of the Capital Asset Pricing Model (CAPM) the relevant risk isA.unique risk.B.market risk.C.standard deviation of returns.D.variance of returns.4.According to the Capital Asset Pricing Model (CAPM) a well diversified portfolios rate of return is a function ofA.market risk.B.unsystematic risk.C.unique risk.D.reinvestment risk.E.None of the options5.According to the Capital Asset Pricing Model (CAPM) a well diversified portfolios rate of return is a function ofA.beta risk.B.unsystematic risk.C.unique risk.D.reinvestment risk.E.None of the options6.According to the Capital Asset Pricing Model (CAPM) a well diversified portfolios rate of return is a function ofA.systematic risk.B.unsystematic risk.C.unique risk.D.reinvestment risk.7.The market portfolio has a beta ofA.0.B.1.C.-1.D.0.5.8.The risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal toA.0.06.B.0.144.C.0.12.D.0.132.E.0.18.9.The risk-free rate and the expected market rate of return are 0.056 and 0.125, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on a security with a beta of 1.25 is equal toA.0.142.B.0.144.C.0.153.D.0.134.E.0.117.10.Which statement is not true regarding the market portfolio?A.It includes all publicly traded financial assets.B.It lies on the efficient frontier.C.All securities in the market portfolio are held in proportion to their market values.D.It is the tangency point between the capital market line and the indifference curve.E.All of the options are true.11.Which statement is true regarding the market portfolio?I) It includes all publicly traded financial assets.II) It lies on the efficient frontier.III) All securities in the market portfolio are held in proportion to their market values.IV) It is the tangency point between the capital market line and the indifference curve.A.I onlyB.II onlyC.III onlyD.IV onlyE.I, II, and III12.Which statement is not true regarding the capital market line (CML)?A.The CML is the line from the risk-free rate through the market portfolio.B.The CML is the best attainable capital allocation line.C.The CML is also called the security market line.D.The CML always has a positive slope.E.The risk measure for the CML is standard deviation.13.Which statement is true regarding the capital market line (CML)?I) The CML is the line from the risk-free rate through the market portfolio.II) The CML is the best attainable capital allocation line.III) The CML is also called the security market line.IV) The CML always has a positive slope.A.I onlyB.II onlyC.III onlyD.IV onlyE.I, II, and IV14.The market risk, beta, of a security is equal toA.the covariance between the securitys return and the market return divided by the variance of the markets returns.B.the covariance between the security and market returns divided by the standard deviation of the markets returns.C.the variance of the securitys returns divided by the covariance between the security and market returns.D.the variance of the securitys returns divided by the variance of the markets returns.15.According to the Capital Asset Pricing Model (CAPM), the expected rate of return on any security is equal toA.Rf + E(RM).B.Rf + E(RM) - Rf.C. E(RM) - Rf.D.E(RM) + Rf.16.The security market line (SML) isA.the line that describes the expected return-beta relationship for well-diversified portfolios only.B.also called the capital allocation line.C.the line that is tangent to the efficient frontier of all risky assets.D.the line that represents the expected return-beta relationship.E.All of the options17.According to the Capital Asset Pricing Model (CAPM), fairly priced securities haveA.positive betas.B.zero alphas.C.negative betas.D.positive alphas.18.According to the Capital Asset Pricing Model (CAPM), underpriced securities haveA.positive betas.B.zero alphas.C.negative betas.D.positive alphas.E.None of the options19.According to the Capital Asset Pricing Model (CAPM), overpriced securities haveA.positive betas.B.zero alphas.C.negative alphas.D.positive alphas.20.According to the Capital Asset Pricing Model (CAPM), a security with aA.positive alpha is considered overpriced.B.zero alpha is considered to be a good buy.C.negative alpha is considered to be a good buy.D.positive alpha is considered to be underpriced.21.According to the Capital Asset Pricing Model (CAPM), which one of the following statements is false?A.The expected rate of return on a security increases in direct proportion to a decrease in the risk-free rate.B.The expected rate of return on a security increases as its beta increases.C.A fairly priced security has an alpha of zero.D.In equilibrium, all securities lie on the security market line.E.All of the statements are true.22.In a well-diversified portfolioA.market risk is negligible.B.systematic risk is negligible.C.unsystematic risk is negligible.D.nondiversifiable risk is negligible.23.Empirical results regarding betas estimated from historical data indicate that betasA.are constant over time.B.of all securities are always greater than one.C.are always near zero.D.appear to regress toward one over time.E.are always positive.24.Your personal opinion is that a security has an expected rate of return of 0.11. It has a beta of 1.5. The risk-free rate is 0.05 and the market expected rate of return is 0.09. According to the Capital Asset Pricing Model, this security isA.underpriced.B.overpriced.C.fairly priced.D.Cannot be determined from data provided.25.The risk-free rate is 7%. The expected market rate of return is 15%. If you expect a stock with a beta of 1.3 to offer a rate of return of 12%, you shouldA.buy the stock because it is overpriced.B.sell short the stock because it is overpriced.C.sell the stock short because it is underpriced.D.buy the stock because it is underpriced.E.None of the options, as the stock is fairly priced26.You invest $600 in a security with a beta of 1.2 and $400 in another security with a beta of 0.90. The beta of the resulting portfolio isA.1.40.B.1.00.C.0.36.D.1.08.E.0.80.27.A security has an expected rate of return of 0.10 and a beta of 1.1. The market expected rate of return is 0.08 and the risk-free rate is 0.05. The alpha of the stock isA.1.7%.B.-1.7%.C.8.3%.D.5.5%.28.Your opinion is that CSCO has an expected rate of return of 0.13. It has a beta of 1.3. The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA.underpriced.B.overpriced.C.fairly priced.D.Cannot be determined from data provided.29.Your opinion is that CSCO has an expected rate of return of 0.1375. It has a beta of 1.3. The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA.underpriced.B.overpriced.C.fairly priced.D.Cannot be determined from data provided.30.Your opinion is that CSCO has an expected rate of return of 0.15. It has a beta of 1.3. The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA.underpriced.B.overpriced.C.fairly priced.D.Cannot be determined from data provided.E.None of the options31.Your opinion is that Boeing has an expected rate of return of 0.112. It has a beta of 0.92. 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 isA.underpriced.B.overpriced.C.fairly priced.D.Cannot be determined from data provided.32.Your opinion is that Boeing has an expected rate of return of 0.0952. It has a beta of 0.92. 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 isA.underpriced.B.overpriced.C.fairly priced.D.Cannot be determined from data provided.33.Your opinion is that Boeing has an expected rate of return of 0.08. It has a beta of 0.92. 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 isA.underpriced.B.overpriced.C.fairly priced.D.Cannot be determined from data provided.34.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% and the expected market rate of return is 11%. Your company has a beta of 1.0 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 beA.4%.B.7%.C.15%.D.11%.E.1%.35.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% and the expected market rate of return is 11%. 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 beA.13.8%.B.7%.C.15%.D.4%.E.1.4%.36.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% and the expected market rate of return is 11%. Your company has a beta of 0.75 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 beA.4%.B.9.25%.C.15%.D.11%.E.0.75%.37.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% and the expected market rate of return is 11%. Your company has a beta of 0.67 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 beA.4%.B.8.69%.C.15%.D.11%.E.0.75%.38.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 5% and the expected market rate of return is 10%. Your company has a beta of 0.67 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 beA.10%.B.5%.C.8.35%.D.28.35%.E.0.67%.39.The risk-free rate is 4%. The expected market rate of return is 11%. If you expect CAT with a beta of 1.0 to offer a rate of return of 10%, you shouldA.buy CAT because it is overpriced.B.sell short CAT because it is overpriced.C.sell short CAT because it is underpriced.D.buy CAT because it is underpriced.E.None of the options, as CAT is fairly priced40.The risk-free rate is 4%. The expected market rate of return is 11%. If you expect CAT with a beta of 1.0 to offer a rate of return of 11%, you shouldA.buy CAT because it is overpriced.B.sell short CAT because it is overpriced.C.sell short CAT because it is underpriced.D.buy CAT because it is underpriced.E.None of the options, as CAT is fairly priced41.The risk-free rate is 4%. The expected market rate of return is 11%. If you expect CAT with a beta of 1.0 to offer a rate of return of 13%, you shouldA.buy CAT because it is overpriced.B.sell short CAT because it is overpriced.C.sell short CAT because it is underpriced.D.buy CAT because it is underpriced.E.None of the options, as CAT is fairly priced42.You invest 55% of your money in security A with a beta of 1.4 and the rest of your money in security B with a beta of 0.9. The beta of the resulting portfolio isA.1.466.B.1.157.C.0.968.D.1.082.E.1.175.43.Given are the following two stocks A and B:If the expected market rate of return is 0.09 and the risk-free rate is 0.05, which security would be considered the better buy and why?A.A because it offers an expected excess return of 1.2%.B.B because it offers an expected excess return of 1.8%.C.A because it offers an expected excess return of 2.2%.D.B because it offers an expected return of 14%.E.B because it has a higher beta.44.Capital asset pricing theory asserts that portfolio returns are best explained byA.economic factors.B.specific risk.C.systematic risk.D.diversification.45.According to the CAPM, the risk premium an investor expects to receive on any stock or portfolio increasesA.directly with alpha.B.inversely with alpha.C.directly with beta.D.inversely with beta.E.in proportion to its standard deviation.46.What is the expected return of a zero-beta security?A.The market rate of return.B.Zero rate of return.C.A negative rate of return.D.The risk-free rate.47.Standard deviation and beta both measure risk, but they are different in that beta measuresA.both systematic and unsystematic risk.B.only systematic risk while standard deviation is a measure of total risk.C.only unsystematic risk while standard deviation is a measure of total risk.D.both systematic and unsystematic risk while standard deviation measures only systematic risk.E.total risk while standard deviation measures only nonsystematic risk.48.The expected return-beta relationshipA.is the most familiar expression of the CAPM to practitioners.B.refers to the way in which the covariance between the returns on a stock and returns on the market measures the contribution of the stock to the variance of the market portfolio, which is beta.C.assumes that investors hold well-diversified portfolios.D.All of the options are true.E.None of the options is true.49.The security market line (SML)A.can be portrayed graphically as the expected return-beta relationship.B.can be portrayed graphically as the expected return-standard deviation of market returns relationship.C.provides a benchmark for evaluation of investment performance.D.can be portrayed graphically as the expected return-beta relationship and provides a benchmark for evaluation of investment performance.E.can be portrayed graphically as the expected return-standard deviation of market returns relationship and provides a benchmark for evaluation of investment performance.50.Research by Jeremy Stein of MIT resolves the dispute over whether beta is a sufficient pricing factor by suggesting that managers should use beta to estimateA.long-term returns but not short-term returns.B.short-term returns but not long-term returns.C.both long- and short-term returns.D.book-to-market ratios.E.None of the options was suggested by Stein.51.Studies of liquidity spreads in security markets have shown thatA.liquid stocks earn higher returns than illiquid stocks.B.illiquid stocks earn higher returns than liquid stocks.C.both liquid and illiquid stocks earn the same returns.D.illiquid stocks are good investments for frequent, short-term traders.52.An underpriced security will plotA.on the security market line.B.below the security market line.C.above the security market line.D.either above or below the security market line depending on its covariance with the market.E.either above or below the security market line depending on its standard deviation.53.An overpriced security will plotA.on the security market line.B.below the security market line.C.above the security market line.D.either above or below the security market line depending on its covariance with the market.E.either above or below the security market line depending on its standard deviation.54.The risk premium on the market portfolio will be proportional toA.the average degree of risk aversion of the investor population.B.the risk of the market portfolio as measured by its variance.C.the risk of the market portfolio as measured by its beta.D.the average degree of risk aversion of the investor population and the risk of the market portfolio as measured by its variance.E.the average degree of risk aversion of the investor population and the risk of the market portfolio as measured by its beta.55.In equilibrium, the marginal price of risk for a risky security must beA.equal to the marginal price of risk for the market portfolio.B.greater than the marginal price of risk for the market portfolio.C.less than the marginal price of risk for the market portfolio.D.adjusted by its degree of nonsystematic risk.E.None of the options is true.56.The capital asset pricing model assumesA.all investors are price takers.B.all investors have the same holding period.C.investors pay taxes on capital gains.D.all investors are price takers and have the same holding period.E.all investors are price takers, have the same holding period, and pay