Reading 46: Discounted Dividend Valuation - LOS f, (Part expected, investor, holding, returns, period

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1.If an investor were attempting to capture an asset’s alpha returns, the expected holding period return (HPR) would be:

A)   higher than the required return.

B)   lower than the required return.

C)   the same as the required return.

D)   equal to the beta returns.

2.If an asset was fairly priced from an investor’s point of view, the holding period return (HPR) would be:

A)   lower than the required return.

B)   higher than the required return.

C)   equal to the alpha returns.

D)   the same as the required return.

3.If an investor had determined that an asset’s market price was too high, (implying that it will soon fall) the expected holding period return (HPR) would be:

A)   equal to the required return.

B)   higher than the required return.

C)   equal to the alpha returns.

D)   lower than the required return.

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答案和详解如下：

1.If an investor were attempting to capture an asset’s alpha returns, the expected holding period return (HPR) would be:

A)   higher than the required return.

B)   lower than the required return.

C)   the same as the required return.

D)   equal to the beta returns.

The correct answer was A)    

Alpha returns are returns in addition to the required returns, so the expected HPR would be higher than the required return.

2.If an asset was fairly priced from an investor’s point of view, the holding period return (HPR) would be:

A)   lower than the required return.

B)   higher than the required return.

C)   equal to the alpha returns.

D)   the same as the required return.

The correct answer was D)

A fairly priced asset would be one that has an expected HPR just equal to the investor’s required return.

3.If an investor had determined that an asset’s market price was too high, (implying that it will soon fall) the expected holding period return (HPR) would be:

A)   equal to the required return.

B)   higher than the required return.

C)   equal to the alpha returns.

D)   lower than the required return.

The correct answer was D)

If the investor determined that the asset’s price was too high, then the expected HPR would be less than the required return, and the asset would have a negative alpha.