Question 1

Using the formula for the security market line if the risk free rate (Rf)is 6 percent,the market rate of return (Km)is 12 percent,the beta (bi)is 1.5,compute the anticipated rate of return (Ki).

Accepted Answer

The answer of Using the formula for the security market...

Question 2

An investment has the following range of outcomes and probabilities.

Accepted Answer

The answer of An investment has the following range of...

Question 3

Using the formula for the security market line (Formula 21-7),if the risk-free rate (R_F)is 6%,the market rate of return (K_M)is 12% and the beta ($\beta$_i)is 1.2,compute the anticipated return for stock i (K_i).

Accepted Answer

The correct answer is A. The formula for the security market line (SML) is:K_i = R_F + $\beta$_i * (K_M - R_F)where:K_i is the anticipated return for stock iR_F is the risk-free rate$\beta$_i is the beta of stock iK_M is the market rate of returnPlugging in the given values, we get:K_i = 6% + 1.2 * (12% - 6%)K_i = 6% + 1.2 * 6%K_i = 6% + 7.2%K_i = 20.4%Therefore, the anticipated return for stock i is 20.4%.

Question 4

The risk that is assumed to be rewarded for an individual stock under the capital asset pricing model is measured by the

Accepted Answer

The risk that is assumed to be rewarded for an individual stock under the capital asset pricing model is measured by the stock's beta, which measures the sensitivity of the stock's returns to the overall market. The individual stock's standard deviation is a measure of total risk, including company-specific risk, and is not directly used in the calculation of expected return in the CAPM. The portfolio standard deviation and portfolio beta are measures of risk for a portfolio, rather than an individual stock.

Question 5

Using the formula for the capital market line (Formula 21-5),if the risk-free rate (R_F)is 6%,the market rate of return (K_M)is 12%,the market standard deviation ($\sigma$_M)is 11%,and the standard deviation of the portfolio ($\sigma$_P)is 14%,compute the anticipated return of the portfolio (K_P).

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Question 6

Given another investment with an expected value of 15 percent and a standard deviation of 2.7 percent that is counter cyclical to the investment in problem 1,what is the expected value of the portfolio and its standard deviation if both are combined into a portfolio with 55 percent invested in the first investment and 45 percent in the second? Assume the correlation coefficient (rij)is -.30.

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Question 7

A stock with a beta of 1.9 would be most likely to be found in what industry (use your best judgment).

Accepted Answer

A stock with a beta of 1.9 is considered to be highly volatile and is likely to have larger fluctuations in price than the overall market. An industry that is prone to such volatility is the airline industry as it is affected heavily by fuel prices, geopolitical events, and other external factors. Therefore, the most likely industry in which a stock with a beta of 1.9 would be found is the airline industry.

Question 8

If you took all the possible investments that investors could acquire and determined the optimum basket of investments,you would come up with point _________ on the capital market line

Accepted Answer

The point M on the capital market line represents the market portfolio, which is considered the optimal basket of investments that maximizes expected return for a given level of risk.

Question 9

Using the formula for the capital market line if the risk-free rate (Rf)is 7 percent,the market rate of return (Km)is 12 percent,the market standard deviation (sm)is 6 percent,and the standard deviation of the portfolio (sp)is 15 percent,compute the anticipated return (Kp).

Accepted Answer

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Quiz 21: A Basic Look at Portfolio Management and Capital Market Theory

Using the formula for the security market line if the risk free rate (Rf)is 6 percent,the market rate of return (Km)is 12 percent,the beta (bi)is 1.5,compute the anticipated rate of return (Ki).

An investment has the following range of outcomes and probabilities.

Using the formula for the security market line (Formula 21-7) ,if the risk-free rate (R_F) is 6%,the market rate of return (K_M) is 12% and the beta ( $\beta$ _i) is 1.2,compute the anticipated return for stock i (K_i) .

The risk that is assumed to be rewarded for an individual stock under the capital asset pricing model is measured by the

A stock with a beta of 1.9 would be most likely to be found in what industry (use your best judgment) .

If you took all the possible investments that investors could acquire and determined the optimum basket of investments,you would come up with point _________ on the capital market line

Using the formula for the capital market line if the risk-free rate (Rf)is 7 percent,the market rate of return (Km)is 12 percent,the market standard deviation (sm)is 6 percent,and the standard deviation of the portfolio (sp)is 15 percent,compute the anticipated return (Kp).

Quiz 21: A Basic Look at Portfolio Management and Capital Market Theory

Using the formula for the security market line if the risk free rate (Rf)is 6 percent,the market rate of return (Km)is 12 percent,the beta (bi)is 1.5,compute the anticipated rate of return (Ki).

An investment has the following range of outcomes and probabilities.

Using the formula for the security market line (Formula 21-7) ,if the risk-free rate (RF) is 6%,the market rate of return (KM) is 12% and the beta ( β\betaβ i) is 1.2,compute the anticipated return for stock i (Ki) .

The risk that is assumed to be rewarded for an individual stock under the capital asset pricing model is measured by the

A stock with a beta of 1.9 would be most likely to be found in what industry (use your best judgment) .

If you took all the possible investments that investors could acquire and determined the optimum basket of investments,you would come up with point _________ on the capital market line

Using the formula for the capital market line if the risk-free rate (Rf)is 7 percent,the market rate of return (Km)is 12 percent,the market standard deviation (sm)is 6 percent,and the standard deviation of the portfolio (sp)is 15 percent,compute the anticipated return (Kp).

Using the formula for the security market line (Formula 21-7) ,if the risk-free rate (R_F) is 6%,the market rate of return (K_M) is 12% and the beta ( $\beta$ _i) is 1.2,compute the anticipated return for stock i (K_i) .