Capital Asset Pricing Model (CAPM)  Assessment
Assess your learning of CAPM, Systematic risk, and Market risk premium. Below quiz is compiled with open source MCQs available as student resources and questions framed by us. The idea is to make online learning interesting and productive.
After you press the Submit button, you can view your score, see correct answers, hints, and links to free online lectures. All the very best.
According to the CAPM, the risk premium an investor expects to receive on any stock increases:
1 point
Directly with beta
Directly with unsystematic risk
Inversely with unsystematic risk
Inversely with beta
Clear selection
Suppose the riskfree rate is 10 percent. The expected return on the market is 18 percent. If a particular stock has a beta of 0.7, what is the expected return based on the CAPM?
2 points
12.5 %
16.5 %
15.6 %
18.6 %
Clear selection
If a stock has an expected return of 20 percent, the riskfree rate is 12 percent, and the expected return on the market is 14 percent. What must its beta be?
2 points
5
4
3
2
Clear selection
A stock has an expected return of 11 percent, the riskfree rate is 5.5 percent, and the market risk premium is 7.5 percent. What must the beta of this stock be?
2 points
0.55
0.64
0.73
0.83
Clear selection
In regression of capital asset pricing model, an intercept of excess returns is classified as
1 point
Sharpe's reward to variability ratio
Tenor's reward to volatility ratio
Jensen's Alpha
Tenor's variance to volatility ratio
Clear selection
Plaid Pants, Inc. common stock has a beta of 0.90, while Acme Dynamite Company common stock has a beta of 1.80. The expected return on the market is 10 percent, and the riskfree rate is 6 percent. According to the capitalasset pricing model (CAPM) and making use of the information above, the required return on Plaid Pants' common stock should be , and the required return on Acme's common stock should be
4 points
9.6 percent; 13.2 percent
9.0 percent; 18.0 percent
14.0 percent; 23.0 percent
3.6 percent; 7.2 percent
Clear selection
If the riskfree rate is 3%, the beta of American Express is 1.3, and the rate of return of the market portfolio is 11%, what is the expected return on American Express?
2 points
11.9%
13.8%
13.4%
14.1%
Clear selection
According to the CAPM, overpriced securities have:
1 point
Negative betas
Negative alphas
Zero betas
Positive alphas
Clear selection
According to the capital asset pricing model, beta is a measure of:
1 point
Unsystematic risk
Systematic risk
Variance of returns
Standard deviation of returns
Clear selection
The APT is an equilibrium model developed by:
1 point
Richard Roll
Stephen Ross
Harry Markowitz
Stephen Ross and Richard Roll
Clear selection
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