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.
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According to the CAPM, the risk premium an investor expects to receive on any stock increases:
Directly with beta
Directly with unsystematic risk
Inversely with unsystematic risk
Inversely with beta
Suppose the risk-free 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?
If a stock has an expected return of 20 percent, the risk-free rate is 12 percent, and the expected return on the market is 14 percent. What must its beta be?
A stock has an expected return of 11 percent, the risk-free rate is 5.5 percent, and the market risk premium is 7.5 percent. What must the beta of this stock be?
In regression of capital asset pricing model, an intercept of excess returns is classified as
Sharpe's reward to variability ratio
Tenor's reward to volatility ratio
Tenor's variance to volatility ratio
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 risk-free rate is 6 percent. According to the capital-asset 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
9.6 percent; 13.2 percent
9.0 percent; 18.0 percent
14.0 percent; 23.0 percent
3.6 percent; 7.2 percent
If the risk-free 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?
According to the CAPM, overpriced securities have:
According to the capital asset pricing model, beta is a measure of:
Variance of returns
Standard deviation of returns
The APT is an equilibrium model developed by:
Stephen Ross and Richard Roll
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