Log in
Finance
2
answers
0
watching
9
views
26 Nov 2019

The security market line is graphical representation of

Bond price and yield to maturity

Expected return and beta

Capm

Both a and c are correct

Both b and c are correct

Watch
2
answers
0
watching
9
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Get unlimited access
Already have an account? Log in
Share
Jarrod Robel
Jarrod RobelLv2
15 Sep 2019
Get unlimited access
Already have an account? Log in
Share

Related questions

3 (AAR and GAR): The price of a security is $100 at time 0, $50at time 1, and $100 at time 2. What’s the AAR and GAR?

4 (FETY): A tax-exempt bond has a yield of 6%, exempt from bothfederal taxes (30%) and state taxes (10%). What’s the FETY of acorporate bond on which both federal and state taxes apply?

5 (yields): A 90-day T-bills pays $10,000 at maturity, thecurrent price is $9875. What’s the bank discount rate? The bondequivalent yield? Effective annual yield?

7. (CAPM): What’s the expected return for a security withbeta=0.8? The market risk-premium is 4% and risk-free rate is 0.5%.Now the actual return of the security is 4%, is it a buy signal ora sell signal?

Suppose a risk-free security pays a 8% return, and a market portfolio has an expected return of 9%.

What is the expected return on a portfolio that has $6,000.00 invested in the risk-free security and $4,000.00 invested in the market portfolio? Round your answer to one decimal place.

What is the CAPM beta of the portfolio? Round your answer to two decimal places.

Does the CAPM beta correspond to the portfolio weight invested in the market portfolio?
Yes or No?

Choose the correct answer:

The beta of an efficient portfolio: a. must be 1 since an efficient portfolio is perfectly positively correlated with the market portfolio.

b. is proportional to 1, depending on the proportion invested in the market portfolio.

c. is equivalent to the portfolio's standard deviation, since standard deviation is the measure of risk for an efficient portfolio.

d. is always less than 1.

Security A has a greater level of systematic risk than security B. The expected equilibrium return for A must be greater than that for B because:

a. B's price will fall as investors realize that B offers lower returns.

b. if it is not, then A's price will fall and B's price will rise as investors sell A and buy B.

c. the Security Market Line is negatively sloped.

d. the standard deviation of A's return is greater than B's.

In case of a simple CAPM being used to estimate a time series data:

a. the mean of a residual risk should be equal to zero.

b. the regression coefficient should be equal to zero.

c. the difference between the market return and the riskfree rate of return should be equal to zero.

d. the beta of the portfolio should be equal to zero.

In a CAPM framework, prohibiting short sales:

a. will prohibit investors from holding the market portfolio in equilibrium.

b. will make the security market line steeper.

c. will encourage investors to hold more riskless assets.

d. will not change the equilibrium.

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in