Please answer all of the following questions
1) 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.
2) 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.
3) Which of the following is not a general conclusion of studies of stock prices?
a. The serial correlation in daily returns in U.S. stocks is positive.
b. The serial correlation in longer period returns (monthly, annual) in U.S. stocks is negative.
c. Filter rules greater than 1% generally do not make money.
d. Stocks that have done well in the past are also likely to do well in the future.
e. There are more runs in daily stock prices than we would expect to find under a random walk.
4) 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.
5) The fact that superior returns can not be made by selling stocks that cut dividends is evidence of:
a. weak-form efficiency.
b. semi-strong-form efficiency.
c. strong-form efficiency
6) Which of the following is an implication of market efficiency?
a. Resources are allocated among firms that put them to the best use.
b. No investor will do better than the S&P 500 in any time period.
c. No investor will do better than the S&P 500 consistently after adjusting for risk.
d. No investor will do better than the S&P 500 consistently after adjusting for risk and transactions costs.
7) Which of the following is an attribute of futures contract?
a. There are no limits on the size of the position that any investor can take in financial futures markets.
b. Futures contracts are marked to the market on a daily basis
c. Margins for futures are more relative to other types of markets.
d. Almost all futures positions are settled by delivery.
Please answer all of the following questions
1) 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.
2) 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.
3) Which of the following is not a general conclusion of studies of stock prices?
a. The serial correlation in daily returns in U.S. stocks is positive.
b. The serial correlation in longer period returns (monthly, annual) in U.S. stocks is negative.
c. Filter rules greater than 1% generally do not make money.
d. Stocks that have done well in the past are also likely to do well in the future.
e. There are more runs in daily stock prices than we would expect to find under a random walk.
4) 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.
5) The fact that superior returns can not be made by selling stocks that cut dividends is evidence of:
a. weak-form efficiency.
b. semi-strong-form efficiency.
c. strong-form efficiency
6) Which of the following is an implication of market efficiency?
a. Resources are allocated among firms that put them to the best use.
b. No investor will do better than the S&P 500 in any time period.
c. No investor will do better than the S&P 500 consistently after adjusting for risk.
d. No investor will do better than the S&P 500 consistently after adjusting for risk and transactions costs.
7) Which of the following is an attribute of futures contract?
a. There are no limits on the size of the position that any investor can take in financial futures markets.
b. Futures contracts are marked to the market on a daily basis
c. Margins for futures are more relative to other types of markets.
d. Almost all futures positions are settled by delivery.
Related questions
CAPM, portfolio risk, and return
Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.)
| Stock | Expected Return | Standard Deviation | Beta | ||
| A | 9.52 | % | 15 | % | 0.8 |
| B | 11.72 | 15 | 1.3 | ||
| C | 13.04 | 15 | 1.6 | ||
Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6%, and the market is in equilibrium. (That is, required returns equal expected returns.)
What is the market risk premium (rM - rRF)? Round your answer to two decimal places.
%
What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places.
What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places.
%
Would you expect the standard deviation of Fund P to be less than 15%, equal to 15%, or greater than 15%?
less than 15%
greater than 15%
equal to 15%
-Select-IIIIIIItem 4
