11．The market is expected to return 12 percent next year and the risk free rate is 6 percent. What is the expected rate of return on a stock with a beta of 0.9? A) 10.8. B) 13.0. C) 16.2. D) 11.4. The correct answer was D) ERstock = Rf + ( ERM - Rf ) Betastock. 12．An investor is considering an investment. After a great deal of careful research he determines that the forecasted return on the investment is 15 percent and estimates the beta to be 2.0. The risk-free rate of interest is 3 percent, and the return on the market is 13 percent. Should the project be undertaken? A) No. The forecasted return is less than the expected return of 23%. B) Yes. The forecasted return is less than the expected return of 18%. C) Yes. The forecasted return is more than the expected return of 13%. D) No. The forecasted return is greater than the expected return of 11%. The correct answer was A) Per CAPM, expected rate of return = Rf + b[E(Rm) – Rf] = 3 + 2(13.0-3.0) = 23%. Since the forecated return of 15% is less than expected rate of return of 23%, the investment should not be undertaken. 13．Answer the following three questions based on the information in the table shown below for the risk-free security, market portfolio, and stocks A, B, and C. Their respective betas and forecasted returns based on fundamental analysis of the economy, industry, and specific company analysis are also provided. Stock | Beta | F(R) | A | 0.5 | 0.065 | B | 1.0 | 0.095 | C | 1.5 | 0.115 | Risk-free | 0.0 | 0.030 | Market | 1.0 | 0.090 |
Based on the information in the above table, the expected returns for A, B, and C for a risk-averse investor are: A) 6.5%, 9.5%, 11.5%. B) 0.5%, 0.5%, -0.5%. C) 4.5%, 9.0%, 13.5%. D) 6.0%, 9.0%, 12.0%. The correct answer was D) The expected rate of return for any individual security or portfolio can be calculated using the capital asset pricing model (CAPM): E(R) = rf + Bi(RM – rf) Expected rate of return for A = 0.03 + 0.5(0.09 – 0.03) = 0.03 + 0.03 = 0.06 or 6.0%.
Expected rate of return for B = 0.03 + 1.0(0.09 – 0.03) = 0.03 + 0.06 = 0.09 or 9.0%.
Expected rate of return for C = 0.03 + 1.5(0.09 – 0.03) = 0.03 + 0.09 = 0.12 or 12.0%. 14．Based on the information in the above table, which of the stocks should be held long in a well-diversified portfolio? A) Only A. B) A, B, and C. C) Only C. D) Both A & B. The correct answer was D) The first step is to calculate the expected rate of return for each security using the capital asset pricing model (CAPM): E(R) = rf + Bi(RM – rf). Expected rate of return for A = 0.03 + 0.5(0.09 – 0.03) = 0.03 + 0.03 = 0.06 or 6.0%.
Expected rate of return for B = 0.03 + 1.0(0.09 – 0.03) = 0.03 + 0.06 = 0.09 or 9.0%.
Expected rate of return for C = 0.03 + 1.5(0.09 – 0.03) = 0.03 + 0.09 = 0.12 or 12.0%. The next step is to compare the forecasted return (FR) for each security with the expected return. If the forecasted return is greater than the expected return, then the stock is under-priced and should be included in the portfolio. If the FR is less than the expected return, then the security is over-priced and should not be included in the portfolio. The forecasted returns for stocks A and B are greater than their expected returns. Therefore, both A and B should be included in the portfolio and not stock C. 15．Based on the information in the above table, which stocks are currently in equilibrium? A) All of the stocks are in equilibrium. B) Stocks A and B are in equilibrium. C) Stock C is in equilibrium. D) None of the stocks are in equilibrium. The correct answer was D) Stocks in equilibrium are properly priced and will lie on the security market line. The forecasted return for the individual security will equal the expected return based on the capital asset pricing model (CAPM). The first step is to calculate the expected rate of return for each security using the CAPM: E(R) = rf + Bi(RM – rf). Expected rate of return for A = 0.03 + 0.5(0.09 – 0.03) = 0.03 + 0.03 = 0.06 or 6.0%.
Expected rate of return for B = 0.03 + 1.0(0.09 – 0.03) = 0.03 + 0.06 = 0.09 or 9.0%.
Expected rate of return for C = 0.03 + 1.5(0.09 – 0.03) = 0.03 + 0.09 = 0.12 or 12.0%. Based on the expected returns given in Table 1 and the calculated required returns for stocks A, B, and C, none of the stocks are in equilibrium. | 
发表于 2008-4-14 17:27
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