Question 1

Which of the following statements is true?

Accepted Answer

A)  A well-diversified portfolio has negligible systematic risk.
B)  A well-diversified portfolio has negligible unsystematic risk.
C)  An individual security has negligible systematic risk.
D)  An individual security has negligible unsystematic risk.
E)  Both A and D.F) A) and C)
G) C) and D)

Question 2

For a diversified portfolio including a large number of stocks, the:

Accepted Answer

A)  weighted average expected return goes to zero.
B)  weighted average of the betas goes to zero.
C)  weighted average of the unsystematic risk goes to zero.
D)  return of the portfolio goes to zero.
E)  return on the portfolio equals the risk-free rate.F) A) and C)
G) D) and E)

Question 3

To estimate the cost of equity capital for a firm using the CAPM, it is necessary to have:

Accepted Answer

A)  company financial leverage, beta, and the market risk premium.
B)  company financial leverage, beta, and the risk-free rate.
C)  beta, company financial leverage, and the industry beta.
D)  beta, company financial leverage, and the market risk premium.
E)  beta, the risk-free rate, and the market risk premium.F) C) and E)
G) A) and B)

Question 4

Discuss the Fama-French three factor model; both what it means and the factors of the model.

Accepted Answer

The Fama-French (1993) three factor mode...

Question 5

The betas along with the factors in the APT adjust the expected return for:

Accepted Answer

A)  calculation errors.
B)  unsystematic risks.
C)  spurious correlations of factors.
D)  differences between actual and expected levels of factors.
E)  All of the above.F) C) and D)
G) B) and E)

Question 6

The Fama-French three factor model includes the following factors:

Accepted Answer

A)  beta, expected return on the market, risk free rate of interest, a size factor, and a value factor.
B)  the market risk premium, a volume factor, and a size factor.
C)  beta, expected return on the market, risk free rate of interest, a volume factor, and a value factor.
D)  the yield on corporate bonds, a size factor, and a market factor.
E)  None of the above.F) A) and E)
G) A) and C)

Question 7

Systematic risk is defined as:

Accepted Answer

A)  a risk that specifically affects an asset or small group of assets.
B)  any risk that affects a large number of assets.
C)  any risk that has a huge impact on the return of a security.
D)  the random component of return.
E)  None of the above.F) C) and D)
G) A) and B)

Exam 12: An Alternative View of Risk and Return: the Arbitrage Pricing Theory

The betas along with the factors in the APT adjust the expected return for:

Correct Answer
verified

To estimate the cost of equity capital for a firm using the CAPM, it is necessary to have:

Correct Answer
verified

Discuss the Fama-French three factor model; both what it means and the factors of the model.

Correct Answer
verified
The Fama-French (1993) three factor mode...
View Answer

The Fama-French three factor model includes the following factors:

Correct Answer
verified

For a diversified portfolio including a large number of stocks, the:

Correct Answer
verified

Systematic risk is defined as:

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Exam 12: An Alternative View of Risk and Return: the Arbitrage Pricing Theory

The betas along with the factors in the APT adjust the expected return for:

Correct AnswerverifiedShow Answer

To estimate the cost of equity capital for a firm using the CAPM, it is necessary to have:

Correct AnswerverifiedShow Answer

Discuss the Fama-French three factor model; both what it means and the factors of the model.

Correct AnswerverifiedThe Fama-French (1993) three factor mode...View AnswerShow Answer

The Fama-French three factor model includes the following factors:

Correct AnswerverifiedShow Answer

For a diversified portfolio including a large number of stocks, the:

Correct AnswerverifiedShow Answer

Systematic risk is defined as:

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Fama-French (1993) three factor mode...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified