11.What is the predicted return for Stonebrook?

A)   11.00%.

B)   11.68%.

C)   0.20%.

D)   0.40%.

12.The factor models for the returns on Omni, Inc., (OM) and Garbo Manufacturing (GAR) are:

R_OM = 20.0% –1.0(F_CONF) + 1.4(F_TIME) + ε_OM
R_GAR = 15.0% –0.5(F_CONF) + 0.8 (F_TIME) + ε_GAR
   

What is the factor sensitivity to the time-horizon factor (TIME) of a portfolio invested 20 percent in Omni and 80 percent in Garbo?

A)   -0.60.

B)   0.92.

C)   0.16.

D)   1.10.

13.Which of the following statements concerning the multi-factor model for returns on stock j {R_j = 12% + 1.4F₁ – 0.8F₂ + ε_j} is FALSE?

A)   The factor sensitivities are +1.4 and -0.8.

B)   The return on stock j will decrease as factor 2 is expected to increase.

C)   The expected return on stock j is 12%.

D)   F₁ and F₂ represent priced risk.

14.The factor models for the returns on Omni, Inc., (OM) and Garbo Manufacturing (GAR) are:

R_OM = 20.0% –1.0(F_CONF) + 1.4(F_TIME) + ε_OM
R_GAR = 15.0% –0.5(F_CONF) + 0.8 (F_TIME) + ε_GAR
   

What is the expected return on a portfolio invested 60 percent in Omni and 40 percent in Garbo?

A)   20.96%.

B)   17.0%.

C)   18.0%.

D)   19.96%.

15.In a multi-factor macroeconomic model the mean-zero error term represents:

A)   the portion of the individual asset's return that is not explained by the systematic factors.

B)   sampling error in estimating factor sensitivities.

C)   the no-arbitrage condition imposed in multi-factor models.

D)   the risk-free rate.

[此贴子已经被作者于2008-4-18 15:25:06编辑过]

11.What is the predicted return for Stonebrook?

A)   11.00%.

B)   11.68%.

C)   0.20%.

D)   0.40%.

The correct answer was B)

The predicted return uses the unemployment and interest rate surprises as follows:

The returns for a stock that are correlated with surprises in interest rates and unemployment rates can be expressed using a two-factor model as:

R_i = a_i+ b_i,1F_Int + b_i,2F_Un + ε_i

where:
R_i = the return on stock i
a_i = the expected return on stock i
b_i,1 = the factor sensitivity of stock i to unexpected changes in interest rates
F_Int = unexpected changes in interest rates (the interest factor) = .053 - .051 = .002
b_i,2 = the factor sensitivity of stock i to unexpected changes in the unemployment rate
F_Un = unexpected changes in the unemployment rate (the unemployment rate factor) = .072 - .068 = .004
ε_i = a mean-zero error term that represents the part of asset i’s return not explained by the two factors.

Thus the predicted return is: .11 + (1.0)(.002) + (1.2)(.004) = .1168 or 11.68%

12.The factor models for the returns on Omni, Inc., (OM) and Garbo Manufacturing (GAR) are:

R_OM = 20.0% –1.0(F_CONF) + 1.4(F_TIME) + ε_OM
R_GAR = 15.0% –0.5(F_CONF) + 0.8 (F_TIME) + ε_GAR

What is the factor sensitivity to the time-horizon factor (TIME) of a portfolio invested 20 percent in Omni and 80 percent in Garbo?

A)   -0.60.

B)   0.92.

C)   0.16.

D)   1.10.

The correct answer was B)

The factor model for the portfolio is:

R_P = [(0.2)(20.0%) + (0.8)(15.0%)]
+ [(0.2)(-1.0) + (0.8)(-0.5)] (F_CONF)
+ [(0.2)(1.4) + (0.8)(0.8)] (F_TIME)
+ [(0.2) ε_OM + (0.8)ε_GAR]

= 16.0% –0.60(F_CONF) + 0.92(F_TIME) + (0.2)ε_OM + (0.8)ε_GAR

13.Which of the following statements concerning the multi-factor model for returns on stock j {R_j = 12% + 1.4F₁ – 0.8F₂ + ε_j} is FALSE?

A)   The factor sensitivities are +1.4 and -0.8.

B)   The return on stock j will decrease as factor 2 is expected to increase.

C)   The expected return on stock j is 12%.

D)   F₁ and F₂ represent priced risk.

The correct answer was B)

In a multi-factor model, only unexpected changes in systematic factors are priced in the sense that they affect stock returns. The return on stock j will decrease only if factor 2 increases unexpectedly (because the factor sensitivity is less than zero). Expected increases will NOT cause stock j returns to decrease.

14.The factor models for the returns on Omni, Inc., (OM) and Garbo Manufacturing (GAR) are:

R_OM = 20.0% –1.0(F_CONF) + 1.4(F_TIME) + ε_OM
R_GAR = 15.0% –0.5(F_CONF) + 0.8 (F_TIME) + ε_GAR

What is the expected return on a portfolio invested 60 percent in Omni and 40 percent in Garbo?

A)   20.96%.

B)   17.0%.

C)   18.0%.

D)   19.96%.

The correct answer was C)

The factor model for the portfolio is:

R_P = [(0.6)(20.0%) + (0.4)(15.0%)]
+ [(0.6)(-1.0) + (0.4)(-0.5)] (F_CONF)
+ [(0.6)(1.4) + (0.4)(0.8)] (F_TIME)
+ [(0.6) ε_OM + (0.4)ε_GAR]

= 18.0% –0.80(F_CONF) + 1.16(F_TIME) + (0.6)ε_OM + (0.4)ε_GAR

15.In a multi-factor macroeconomic model the mean-zero error term represents:

A)   the portion of the individual asset's return that is not explained by the systematic factors.

B)   sampling error in estimating factor sensitivities.

C)   the no-arbitrage condition imposed in multi-factor models.

D)   the risk-free rate.

The correct answer was A)

The mean-zero error term represents the unsystematic, firm-specific, diversifiable risks that are not explained by the systematic factors.