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Finance 534 week 5 quiz 4

Question # 00001052
Subject: Finance
Due on: 09/18/2013
Posted On: 09/13/2013 03:29 AM

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Question
  • Question 1

0 out of 2 points




Which of the following statements is CORRECT?

Answer








  • Question 2

2 out of 2 points




During the coming year, the market risk premium (rM ? rRF), is expected to fall, while the risk-free rate, rRF, is expected to remain the same. Given this forecast, which of the following statements is CORRECT?

Answer








  • Question 3

0 out of 2 points




Which of the following is most likely to occur as you add randomly selected stocks to your portfolio, which currently consists of 3 average stocks?

Answer








  • Question 4

2 out of 2 points




Which of the following statements is CORRECT?

Answer








  • Question 5

2 out of 2 points




Your portfolio consists of $50,000 invested in Stock X and $50,000 invested in Stock Y. Both stocks have an expected return of 15%, betas of 1.6, and standard deviations of 30%. The returns of the two stocks are independent, so the correlation coefficient between them, rXY, is zero. Which of the following statements best describes the characteristics of your 2-stock portfolio?

Answer








  • Question 6

2 out of 2 points




Which of the following statements is
CORRECT?

Answer








  • Question 7

2 out of 2 points




A highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. The three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. Potential new Stocks A and B both have expected returns of 15%, are in equilibrium, and are equally correlated with the market, with r = 0.75. However, Stock A's standard deviation of returns is 12% versus 8% for Stock B. Which stock should this investor add to his or her portfolio, or does the choice not matter?

Answer











  • Question 8

2 out of 2 points




Which of the following is NOT a potential problem when estimating and using betas, i.e., which statement is FALSE?

Answer








  • Question 9

2 out of 2 points




Stock X has a beta of 0.5 and Stock Y has a beta of 1.5. Which of the following statements must be true, according to the CAPM?

Answer








  • Question 10

2 out of 2 points




Bob has a $50,000 stock portfolio with a beta of 1.2, an expected return of 10.8%, and a standard deviation of 25%. Becky also has a $50,000 portfolio, but it has a beta of 0.8, an expected return of 9.2%, and a standard deviation that is also 25%. The correlation coefficient, r, between Bob's and Becky's portfolios is zero. If Bob and Becky marry and combine their portfolios, which of the following best describes their combined $100,000 portfolio?

Answer








  • Question 11

2 out of 2 points




Stock A's beta is 1.5 and Stock B's beta is 0.5. Which of the following statements must be true, assuming the CAPM is correct.

Answer








  • Question 12

2 out of 2 points




Which of the following statements is CORRECT?

Answer








  • Question 13

0 out of 2 points




Stock A has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%. Stock B also has a beta of 1.2, but its expected return is 10% and its standard deviation is 15%. Portfolio AB has $900,000 invested in Stock A and $300,000 invested in Stock B. The correlation between the two stocks' returns is zero (that is, rA,B = 0). Which of the following statements is CORRECT?

Answer








  • Question 14

2 out of 2 points




Which of the following statements is CORRECT?

Answer








  • Question 15

2 out of 2 points




Assume that the risk-free rate is 5%. Which of the following statements is CORRECT?

Answer








  • Question 16

2 out of 2 points




An increase in a firm’s expected growth rate would cause its required rate of return to

Answer








  • Question 17

2 out of 2 points




Two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return. Which of the following statements is CORRECT?

Answer








  • Question 18

0 out of 2 points




A stock is expected to pay a year-end dividend
of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g = -5%). If the company is in equilibrium and its expected and required rate of return is 15%, which of the following statements is CORRECT?

Answer








  • Question 19

2 out of 2 points




Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

A B
Price $25 $40
Expected growth 7% 9%
Expected return 10% 12%

Answer








  • Question 20

2 out of 2 points




The preemptive right is important to shareholders
because it

Answer








  • Question 21

0 out of 2 points




Which of the following statements is CORRECT?

Answer








  • Question 22

2 out of 2 points




For a stock to be in equilibrium, that is, for there to be no long-term pressure for its price to depart from its current level, then

Answer











  • Question 23

2 out of 2 points




Which of the following statements is CORRECT?

Answer











  • Question 24

2 out of 2 points




If markets are in equilibrium, which of the following conditions will exist?

Answer








  • Question 25

2 out of 2 points




If a stock’s dividend is expected
to grow at a constant rate of 5% a year, which of the following statements is CORRECT? The stock is in equilibrium.

Answer








  • Question 26

2 out of 2 points




Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT?

Answer








  • Question 27

2 out of 2 points




Stocks A and B have the following data. Assuming
the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

A B
Required return 10% 12%
Market price $25 $40
Expected growth 7% 9%

Answer








  • Question 28

2 out of 2 points




Companies can issue different classes of common stock. Which of the following statements concerning stock classes is CORRECT?

Answer








  • Question 29

2 out of 2 points




Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of
the following statements is CORRECT?

X Y
Price $30 $30
Expected growth (constant) 6% 4%
Required return 12% 10%

Answer








  • Question 30

2 out of 2 points




Which of the following statements is CORRECT?

Answer




Tags quiz week finance answer question following 2points stock statements correct expected stocks return portfolio equilibrium rate beta market standard required price growth deviation invested 0 returns auming zero correlation efficient

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Finance 534 week 5 quiz 4

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Posted On: 09/13/2013 03:30 AM
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Preview: Selected xxxxxxxxxxx The xxxx coefficient of x stock is xxxxxxxx found xx xxxxxxxxxx past xxxxxxx on a xxxxx against past xxxxxx returns xx xxx could xxxx construct a xxxxxxx diagram of xxxxxxx on xxx xxxxx versus xxxxx on the xxxxxxx estimate the xxxxx of xxx xxxx of xxxx fit, and xxx it as xxxx   xxxxxxxx xxxx historical xxxx may differ xxxx the beta xxxx exists xx xxx future xxxxxxx Answer:   The xxxx coefficient of x stock xx xxxxxxxx found xx regressing past xxxxxxx on a xxxxx against xxxx xxxxxx returns xx One could xxxx construct a xxxxxxx diagram xx xxxxxxx on xxx stock versus xxxxx on the xxxxxxx estimate xxx xxxxx of xxx line of xxxx fit, and xxx it xx xxxx   xxxxxxxx this historical xxxx may differ xxxx the xxxx xxxx exists xx the future xxxxxxxx 5 2 xxx of x xxxxxxxxxx portfolio xxxxxxxx of $50,000 xxxxxxxx in Stock x and xxxxxxx xxxxxxxx in xxxxx Y   xxxx stocks have xx expected xxxxxx xx 15%, xxxxx of 1 xx and standard xxxxxxxxxx of xxx xx The xxxxxxx of the xxx stocks are xxxxxxxxxxxx so xxx xxxxxxxxxxx coefficient xxxxxxx them, rXY, xx zero   xxxxx of xxx xxxxxxxxx statements xxxx describes the xxxxxxxxxxxxxxx of your xxxxxxx portfolio?Answer xxxxxxxx xxxxxxxxxxx Your xxxxxxxxx has a xxxx equal to x 6, xxxxxx xxxxxxxx return xx 15% Correct xxxxxxxxxxx Your portfolio xxx a xxxx xxxxx to x 6, andits xxxxxxxx return is xxx Question x x out xx 2 pointsWhich xx the following xxxxxxxxxx isCORRECT?Answer xxxxxxxx xxxxxxxxxxx Diversifiable xxxx can be xxxxxxx by forming x large xxxxxxxxxx xxx normally xxxx highly-diversified portfolios xxx subject to xxxxxx (or xxxxxxxxxxx xxxx Correct xxxxxxxxxxx Diversifiable risk xxx be reduced xx forming x xxxxx portfolio, xxx normally even xxxxxxxxxxxxxxxxxx portfolios are xxxxxxx to xxxxxx xxx systematic) xxxx Question 7 x out of x pointsA xxxxxx xxxxxxxxxxx investor xx considering adding xxx additional stock xx a xxxxxxx xxxxxxxxxx to xxxx a 4-stock xxxxxxxxx   The xxxxx stocks xxxxxxxxx xxxx all xxxx b = x 0, and xxxx are xxxxxxxxx xxxxxxxxxx correlated xxxx the market xx Potential new xxxxxx A xxx x both xxxx expected returns xx 15%, are xx equilibrium, xxx xxx equally xxxxxxxxxx with the xxxxxxx with r x 0 xx xx However, xxxxx A's standard xxxxxxxxx of returns xx 12% xxxxxx xx for xxxxx B   xxxxx stock should xxxx investor xxx xx his xx her portfolio, xx does the xxxxxx not xxxxxxxxxxxxx xxxxxxxx Answer:   xxxxx B Correct xxxxxxxxxxx Stock B xxxxxxxx 8 x xxx of x pointsWhich of xxx following is xxx a xxxxxxxxx xxxxxxx when xxxxxxxxxx and using xxxxxx i e x which xxxxxxxxx xx FALSE?Answer xxxxxxxx Answer:   The xxxx of an xxxxxxxx stock," xx xxxx market," xxx change over xxxxx sometimes drastically xxxxxxx Answer:   xxx xxxx of xx "average stock," xx "the market," xxx change xxxx xxxxx sometimes xxxxxxxxxxx Question 9 x out of x pointsStock x xxx a xxxx of 0 x and Stock x has x xxxx of x 5   xxxxx of the.....
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