Capital asset pricing model approach to equity valuation

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Reference no: EM13944450

1. The capital asset pricing model approach to equity valuation:

Is dependent upon the unsystematic risk of a security.

Assumes the reward-to-risk ratio increases as beta increases.

Can only be applied to dividend-paying firms.

Assumes a firm’s future risks will be higher than its current risks.

Assumes the reward-to-risk ratio is constant.

2. You have just made a $1,500 contribution to your individual retirement account. Assume you earn a rate of return of 8.7 percent and make no additional contributions. How much more will your account be worth when you retire in 25 years than it would be if you waited another 5 years before making this contribution?

$6,306.16

$4,658.77

$3,311.18

$6,907.17

$4,117.64

3. You are preparing to make monthly payments of $75, beginning at the end of this month, into an account that pays 6 percent interest compounded monthly. How many payments will you have made when your account balance reaches $10,000

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Reference no: EM13944450

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