Fin 534 week 5 quiz 4 New Syllabus

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Fin 534 week 5 quiz 4 New Syllabus

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· Question 1 Inflation, recession, and high interest rates are economic events that are best characterized as being Answer · Question 2 For a portfolio of 40 randomly selected stocks, which of the following is most likely to be true? Answer · Question 3 Which of the following statements is CORRECT? Answer · Question 4 Which of the following statements is CORRECT? Answer · Question 5 Stock A's beta is 1.5 and Stock B's beta is 0.5.  Which of the following statements must be true about these securities?  (Assume market equilibrium.) Answer · Question 6 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 7 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 8 Stock A has a , while Stock B has a   Which of the following statements is CORRECT? Answer . · Question 9 Which of the following statements is CORRECT? Answer · Question 10 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 11 0 out of 2 points Which of the following statements is CORRECT? Answer · Question 12 2 out of 2 points The risk-free rate is 6%; Stock A has a beta of 1.0; Stock B has a beta of 2.0; and the market risk premium, rM − rRF, is positive.  Which of the following statements is CORRECT? Answer · Question 13 Assume that in recent years both expected inflation and the market risk premium (rM − rRF) have declined.  Assume also that all stocks have positive betas.  Which of the following would be most likely to have occurred as a result of these changes? Answer · Question 14 You have the following data on three stocks: Stock Standard Deviation Beta A  20%  0.59 B  10%  0.61 C  12%  1.29 If you are a strict risk minimizer, you would choose Stock ____ if it is to be held in isolation and Stock ____ if it is to be held as part of a well-diversified portfolio. Answer . · Question 15 Which is the best measure of risk for a single asset held in isolation, and which is the best measure for an asset held in a diversified portfolio? Answer · Question 16 If markets are in equilibrium, which of the following conditions will exist? Answer · Question 17 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 18 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 19 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 20 The expected return on Natter Corporation’s stock is 14%.  The stock’s dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share.  Which of the following statements is CORRECT? Answer · Question 21 Which of the following statements is CORRECT? Answer · Question 22 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 23 Which of the following statements is CORRECT? Answer · Question 24 Stock X has the following data.  Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT? Expected dividend, D1  $3.00 Current Price, P0  $50 Expected constant growth rate  6.0% Answer · Question 25 Companies can issue different classes of common stock.  Which of the following statements concerning stock classes is CORRECT? Answer . · Question 26 Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%.  Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? A   B Beta  1.10  0.90 Constant growth rate  7.00%  7.00% Answer · Question 27 An increase in a firm’s expected growth rate would cause its required rate of return to Answer . · Question 28 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 29 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 30 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  $25  $25 Expected dividend yield  5%  3% Required return  12%  10%

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