BUSI 420 Read & Interact Jordan, Miller Jr., & Dolvin Chapter 12 solutions complete answers

BUSI 420 Read & Interact Jordan, Miller Jr., & Dolvin Chapter 12 solutions complete answers

 

True or false: A stock's beta is estimated as the slope of a line that uses the market returns as x and the stock returns as y.

 

True or false: Given a portfolio made up of Asset A and the risk-free rate, the percentage invested in A can never exceed 100 percent.

 

A reward-to-risk ratio of 10 percent means that the given asset has a risk premium of 10 percent per unit of _____.

 

Which of the following securities would have the highest required return?

 

Suppose that the investors believe the Federal Reserve, or Fed, is going to raise rates by 25 bps. If the Fed announces that they are raising rates by 50 bps, the surprise component of the announcement is _____ bps.

 

True or false: On average, the actual return equals the expected return.

 

Given a portfolio made up of Asset A and the risk-free rate, the percentage invested in A _________.

 

Suppose Asset A has a reward-to-risk ratio of 7.50%, while Asset B has a reward-to-risk ratio of 5.5%. If the risk-free rate is 3%, investors should prefer _______.

 

A stock with a beta        (greater/less) than one will be more sensitive to market movements.

 

Uncertainties surrounding general economic conditions are examples of _________ risk.

 

True or false: If the Federal Reserve raises rates by 25 bps, in an efficient market bond prices will always fall as a result.

 

True or false: The unsystematic portion of a return is unique to the investment.

 

Actual return differs from the expected return because of        part of the return.

 

An announcement that a company is being placed under SEC investigation is an example of _________ risk.

 

Which of the following terms is not synonymous with unsystematic risk?

 

True or false: The unsystematic portion of a return is directly related to the unsystematic portion of the return on other investments.

 

The expected return on an asset depends on its __________ risk.

 

The        coefficient measures the relative systematic risk of an asset.

 

Which of the following is not a reason why beta coefficient estimates would differ?

 

____________ risk is eliminated by diversification.

 

True or false: A portfolio's beta is a weighted average of the betas from the individual assets in the portfolio.

 

True or false: Assets with higher total risk will always have higher expected returns.

 

True or false: In an active, competitive market, the reward-to-risk ratio should be consistent across investments.

 

The line that describes the relationship between systematic risk and expected return is called the _______.

 

An average asset has a beta of ____.

 

The capital asset pricing model is a theory of _____ for securities in a competitive capital market.

 

True or false: Beta estimates will be constant across data providers.

 

True or false: A stock that has a deviation that is higher than the market will also have a beta that is above 1.

 

The calculation of a portfolio's beta is similar to that of the calculation of a portfolio's _____.

 

The fundamental relation between risk and return says that, in an active, competitive market, the reward-to-risk ratio should be _____.

 

The graphical representation of the linear relationship between systemic risk and expected return in financial markets is called the        market line.

 

When examining the results of a linear regression, which of the following provides an estimate of a stock's beta?

 

Which of the following is not a component of the CAPM?

 

Which of the following is a component of the calculation for beta?

 

The most common index used to estimate U.S. stock betas is the _______.

 

When calculating beta using linear regression, the returns of the        (market/stock) are defined as the x variable, and the returns of the        (market/stock) are defined as the y variable.

 

Stocks with a        (small/large) market capitalization tend to have higher average returns.

 

Betas calculated using _______ data will be more stable.

 

       (Value/Growth) stocks tend to have higher average returns over time.