A) I and II
B) II and III
C) II and IV
D) II,III,and IV
E) I,III,and IV
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D
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A) Rf + β[E(RM) ].
B) Rf + σ[E(RM) - Rf].
C) Rf + β[E(RM) - Rf].
D) E(RM) + Rf.
E) none of these.
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A) 0.
B) 1.
C) -1.
D) 0.5.
E) none of these
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B
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A) 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 these was suggested by Stein.
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A) above the security market line.
B) on the security market line.
C) on the capital market line.
D) above the capital market line.
E) below the security market line.
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A) the sum of the values of all equity securities.
B) the sum of the values of all equity and fixed income securities.
C) the sum the values of all equity,fixed income,and derivative securities.
D) the sum of the values of all equity,fixed income,and derivative securities plus the value of all mutual funds.
E) the entire wealth of the economy.
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A) market risk is negligible.
B) systematic risk is negligible.
C) unsystematic risk is negligible.
D) nondiversifiable risk is negligible.
E) none of these.
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A) have positive betas.
B) have zero alphas.
C) have negative betas.
D) have positive alphas.
E) none of these.
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A) the security market line.
B) the capital market line.
C) the capital allocation line.
D) the efficient frontier with a risk-free asset.
E) the efficient frontier without a risk-free asset.
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A
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A) 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.
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A) the CAPM is no longer valid.
B) the CAPM underlying assumptions are not violated.
C) the implications of the CAPM are not violated as long as investors' liquidity needs are not priced.
D) the implications of the CAPM are no longer useful.
E) none of these are true.
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A) underpriced by 7%.
B) overpriced.
C) fairly priced.
D) cannot be determined from data provided.
E) underpriced by 5%.
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A) 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) both a and b are true.
E) both a and c are true.
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A) is the market risk premium divided by the standard deviation of the market returns.
B) has a reward-to-risk ratio of [E(rM) - rf]/σ2M.
C) is the price of a U.S.T-bill.
D) a and b.
E) a and c.
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A) The expected rate of return on a security decreases 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 these statements are true.
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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 CML is the line from the risk-free rate through the market portfolio,is the best attainable capital allocation line,and it always has a positive slope.
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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) It includes all publicly traded financial assets,lies on the efficient frontier,and all securities in the market portfolio are held in proportion to their market values.
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A) 1.40
B) 1.00
C) 0.36
D) 1.08
E) 0.80
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A) 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) the line that represents the relationship between an individual security's return and the market's return.
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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 these are true.
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