习题
Chapter 9
3. You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars):
The project’s beta is 1.8. Assuming that, what is the net prent value of the project? What is the highest possible beta estimate for the project before its NPV becomes negative?
4. Are the following true or fal? Explain.
a. Stocks with a beta of zero offer an expected rate of return of zero.
b. The CAPM implies that investors require a higher return to hold highly volatile curities.
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c. You can construct a portfolio with beta of .75 by investing .75 of the investment budget in T-bills and the remainder in the market portfolio.
In problems 13 to 15 assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%.一线英语
13. Ashare of stock lls for $50 today. It will pay a dividend of $6 per share at the end of the year. Its beta is 1.2. What do investors expect the stock to ll for at the end of the year?
14. I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is .5, when in fact the beta is really 1, how much more will I offer for the firm than it is truly worth?
15. A stock has an expected rate of return of 4%. What is its beta?
17. Suppo the rate of return on short-term government curities (perceived to be riskfree) is about 5%. Suppo also that the expected rate of return required by the market for a portfolio with a beta of 1 is 12%. According to the capital ast pricing model (curity market line):
a. What is the expected rate of return on the market portfolio?
tensionerb. What would be the expected rate of return on a stock with beta＝0?
c. Suppo you consider buying a share of stock at $40. The stock is expected to pay $3 dividends next year and you expect it to ll then for $41. The stock risk has been evaluated at beta＝－0.5. Is the stock overpriced or underpriced?
capeverde21. The curity market line depicts:
a. A curity’s expected return as a function of its systematic risk.
b. The market portfolio as the optimal portfolio of risky curities.
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c. The relationship between a curity’s return and the return on an index.
d. The complete portfolio as a combination of the market portfolio and the risk-free ast.
22. Within the context of the capital ast pricing model (CAPM), assume:
• Expected return on the market ＝15%.
• Risk-free rate _ 8%.
• Expected rate of return on XYZ curity ＝17%.
npt• Beta of XYZ curity ＝1.25.
Which one of the following is correct?
a. XYZ is overpriced.
b. XYZ is fairly priced.
c. XYZ’s alpha is＝-0.25%.
d. XYZ’s alpha is=0 .25%.
The following table shows risk and return measures for two portfolios. answer question 26 and 27
introduce26. When plotting portfolio R on the preceding table relative to the SML, portfolio R lies:
a. On the SML.
b. Below the SML.
c. Above the SML.
d. Insufficient data given.
27. When plotting portfolio R relative to the capital market line, portfolio R lies:
a. On the CML.
b. Below the CML.
c. Above the CML.
d. Insufficient data given.
31. Karen Kay, a portfolio manager at Collins Ast Management, is using the capital ast pricing model for making recommendations to her clients. Her rearch department has developed the information shown in the following exhibit.
2014专八答案a. Calculate expected return and alpha for each stock.
b. Identify and justify which stock would be more appropriate for an investor who wants to
i. add this stock to a well-diversified equity portfolio.
ii. hold this stock as a single-stock portfolio.
Chapter 11
1. A portfolio management organization analyzes 60 stocks and constructs a meanvariance efficient portfolio using only the 60 curities.
a. How many estimates of expected returns, variances, and covariances are needed to optimize this portfolio?
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b. If one could safely assume that stock market returns cloly remble a single index structure, how many estimates would be needed?
2. The following are estimates for two of the stocks in problem 1.
The market index has a standard deviation of 22% and the risk-free rate is 8%.
a. What is the standard deviation of stocks A and B?
b. Suppo that we were to construct a portfolio with proportions:
Stock A: .30
Stock B: .45
T-bills: .25
Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio.
4. Consider the two (excess return) index model regression results for A and B:
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a. Which stock has more firm-specific risk?
b. Which has greater market risk?
c. For which stock does market movement explain a greater fraction of return variability?
d. Which stock had an average return in excess of that predicted by the CAPM?
e. If rf were constant at 6% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A ?
U the following data for problems 5 through 9. Suppo that the index model for stocks A and B is estimated from excess returns with the following results:
5. What is the standard deviation of each stock?
6. Break down the variance of each stock to the systematic and firm-specific components.
7. What are the covariance and correlation coefficient between the two stocks?
8. What is the covariance between each stock and the market index?
9. Are the intercepts of the two regressions consistent with the CAPM? Interpret their values.
15. Bad on current dividend yields and expected growth rates, the expected rates of return on stocks A and B are 11% and 14%, respectively. The beta of stock A is .8, while that of stock B is 1.5. The T-bill rate is currently 6%, while the expected rate of return on the S&P 500 index is 12%. The standard deviation of stock A is 10% annually, while that of stock B is 11%.
a. If you currently hold a well-diversified portfolio, would you choo to add either of the stocks to your holdings?
b. If instead you could invest only in bills and one of the stocks, which stock would you choo? Explain your answer using either a graph or a quantitative measure of the attractiveness of the stocks.
16. Assume the correlation coefficient between Baker Fund and the S&P 500 Stock Index is .70. What percentage of B aker Fund’s total risk is specific (i.e., nonsystematic)?
a. 35%
b. 49%
c. 51%
d. 70%
17. The correlation between the Charlottesville International Fund and the EAFE Market Index is 1.0. The expected return on the EAFE Index is 11%, the expected return on Charlottesville International
Fund is 9%, and the risk-free return in EAFE countries is 3%. Bad on this analysis, the implied beta of Charlottesville International is:
a. Negative
b. .75
c. .82
d. 1.00
chapter 12
2. Which of the following most appears to contradict the proposition that the stock market is weakly efficient? Explain.
a. Over 25% of mutual funds outperform the market on average.
b. Insiders earn abnormal trading profits.
c. Every January, the stock market earns abnormal returns.
3. Suppo that, after conducting an analysis of past stock prices, you come up with the following obrvations. Which would appear to contradict the weak form of the efficient market hypothesis? Explain.
a. The average rate of return is significantly greater than zero.
b. The correlation between the return during a given week and the return during the following week is zero.
c. One could have made superior returns by buying stock after a 10% ri in price and lling after a 10% fall.
d. One could have made higher-than-average capital gains by holding stocks with low dividend yields.
4. Which of the following statements are true if the efficient market hypothesis holds?
a. It implies that future events can be forecast with perfect accuracy.
b. It implies that prices reflect all available information.
c. It implies that curity prices change for no discernible reason.
d. It implies that prices do not fluctuat
e.
5. Which of the following obrvations would provide evidence against the mistrong form of the efficient market theory? Explain.
a. Mutual fund managers do not on average make superior returns.
b. You cannot make superior profits by buying (or lling) stocks after the announcement of an abnormal ri in dividends.
c. Low P/E stocks tend to have positive abnormal returns.
d. In any year approximately 50% of pension funds outperform the market.
