Capital asset pricing model reflects risk

Assignment Help Financial Management

Reference no: EM132048145

1. An individual has $40,000 invested in a stock with a beta of 0.8 and another $40,000 invested in a stock with a beta of 1.4, what is her portfolio’s beta?

A. 0.9

B. 1.10

C. 2.2

D. 1.12

2. Capital Asset Pricing Model (CAPM) reflects the risk before diversification.

A. True B. False

3. A $1,000 face value bond currently has a yield to maturity of 8.22 percent. The bond matures in five years and pays interest semiannually. The coupon rate is 7.5 percent. What is the current price of this bond? [Match time period and interest rate]

A. $948.01

B. $989.60

C. $1,005.26

D. $970.96

E. $1,010.13

4. Which of following is incorrect?

A. Systematic risk can be eliminated by proper diversification.

B. Market risk is the risk remains after diversification.

C. Market risk is also known as systematic risk.

D. All of above are correct.

5. If g=6%, ??1 = 2, and ???? = 13%, what is the stock’s value?

A. 25.89

B. 28.57

C. 30.29

D. 50.22

E. None of the above

6. Assuming a stock’s dividend yield is 5% and capital gains yield is 8%, what is the stock’s total return?

A. 3%

B. 5%

C. 8%

D. 13%

7. Which of the following is the criticism of dividend discount model?

A. It does not account for the firm’s dividend

B. It does not account for the firm’s growth

C. It does not account for investor’s required rate of return

D. It does not account the situation that dividend is zero

E. None of the above

8. Under which of the following situations, the constant growth dividend discount model does not apply?

A. When dividend is positive

B. The growth rate (g) is constant

C. When the growth rate (g) is negative

D. When the growth rate (g) > investor required rate of return (rs)

E. None of the above

Reference no: EM132048145

Questions Cloud

Prepare an amortization schedule for a five-year loan : Prepare an amortization schedule for a five-year loan of $56,000. Assume the loan agreement calls for a principal reduction of $11,200 every year.

Calculate the incremental accounts receivable : Calculate the incremental accounts receivable. Calculate the ROI on the additional investment.

Prepare an amortization schedule for loan : Prepare an amortization schedule for three-year loan of $54,000. The interest rate is 8 percent per year, and the loan calls for equal annual payments.

Calculate in-use percent for this program : There are a total of 581,600 television households in this market. Calculate In-Use Percent for this program.

Capital asset pricing model reflects risk : Capital Asset Pricing Model (CAPM) reflects the risk before diversification. Which of the following is the criticism of dividend discount model?

Describe the various theological models of the image of god : Describe the various theological models of the image of God. Evaluate which model you believe captures the essence of biblical teaching. 300 words count.

Maximum height in meters above the nozzle : Suppose you have a 8.2 cm diameter fire horse with 2.2 diameter nozzle hole. To what maximum height in meters above the nozzle can this water rise.

How much potential energy did the rock : How much potential energy did the rock have before it was dropped from the window? Assume no energy was lost to air resistance.

Which moral theory do you find most plausible : Do an Internet search using the term "Willowbrook Experiments." Briefly describe the experiment. Critically evaluate the study from the standpoint.

User Account

All Pages