21．Which of the following theories assume that markets are perfectly competitive?

A)   Arbitrage pricing theory.

B)   Both, capital asset pricing model and arbitrage pricing theory.

C)   Capital asset pricing model.

D)   Neither capital asset pricing model nor arbitrage pricing theory.

22．Leslie Vista has never been satisfied with the capital asset pricing model (CAPM) because of its restrictive assumptions. While the model seems to work fairly well in her own stock-valuation systems, she does not trust results that depend on assumptions that are unrealistic in the real world. Vista is a literal thinker and prefers tangible solutions. She does not hold with theory and rarely draws intuitive conclusions.

As an alternative to the CAPM, Vista decides to try out the arbitrage pricing model (APT). She likes the APT because it does not rely on the several assumptions that underlie the CAPM. Vista does some research comparing the CAPM to the APT and lists some of the assumptions of the CAPM:

§
   Markets are perfectly competitive.

§
   Investors use the Markowitz mean-variance framework.

§
   Represented by a multi-factor model.

§
   Unlimited risk-free lending and borrowing is permitted.

When Vista tells her boss, Mark Mazur, about her desire to use the APT, Mazur warns her of weaknesses in both models.  Mazur also explains that the company has established the capital asset pricing model as its in-house valuation method and advises that Vista familiarize herself with how to derive the capital market line (CML) and the security market line (SML).

After reviewing studies on the CAPM and the APT, Vista decides to develop her own microeconomic multifactor model. She establishes a proxy for the market portfolio, then considers the importance of various factors in determining stock returns. She decides to use the following factors in her model:

§
   Changes in payout ratios.

§
   Credit rating changes.

§
   Companies’ position in the business cycle.

§
   Management tenure and qualifications.

In order to derive the CML, Vista needs the:

A)   expected market return, portfolio beta, and risk-free rate.

B)   portfolio beta, market variance, and expected market return.

C)   market variance, portfolio beta, risk-free rate, and expected portfolio return.

D)   risk-free rate, market variance, portfolio variance, and expected market return.

23．Vista’s analysis of CAPM assumptions is flawed. Which of the following assumptions that Vista noted is not part of the CAPM?

A)   Markets are perfectly competitive.

B)   Represented by a multi-factor model.

C)   Investors use the Markowitz mean-variance framework.

D)   Unlimited risk-free lending and borrowing is permitted.

24．Which of the following factors is least appropriate for Vista’s factor model?

A)   Changes in payout ratios.

B)   Credit rating changes.

C)   Companies’ position in the business cycle.

D)   Management tenure and qualifications.

25．After further research on valuation models, Vista is most likely to use:

A)   the zero-beta CAPM because it does not require the assumption that investors can borrow at the risk-free rate.

B)   the traditional SML, assuming she had sufficient historical data to develop accurate beta estimates.

C)   discounted cash flows, despite the need to estimate future cash flows and terminal values.

D)   APT because it allows the use of a variety of factors.

[此贴子已经被作者于2008-4-18 15:34:08编辑过]

21．Which of the following theories assume that markets are perfectly competitive?

A)   Arbitrage pricing theory.

B)   Both, capital asset pricing model and arbitrage pricing theory.

C)   Capital asset pricing model.

D)   Neither capital asset pricing model nor arbitrage pricing theory.

The correct answer was C)

CAPM assumes that markets are perfectly competitive. APT does not make this assumption.

22．Leslie Vista has never been satisfied with the capital asset pricing model (CAPM) because of its restrictive assumptions. While the model seems to work fairly well in her own stock-valuation systems, she does not trust results that depend on assumptions that are unrealistic in the real world. Vista is a literal thinker and prefers tangible solutions. She does not hold with theory and rarely draws intuitive conclusions.

As an alternative to the CAPM, Vista decides to try out the arbitrage pricing model (APT). She likes the APT because it does not rely on the several assumptions that underlie the CAPM. Vista does some research comparing the CAPM to the APT and lists some of the assumptions of the CAPM:

§ Markets are perfectly competitive.

§ Investors use the Markowitz mean-variance framework.

§ Represented by a multi-factor model.

§ Unlimited risk-free lending and borrowing is permitted.

When Vista tells her boss, Mark Mazur, about her desire to use the APT, Mazur warns her of weaknesses in both models.  Mazur also explains that the company has established the capital asset pricing model as its in-house valuation method and advises that Vista familiarize herself with how to derive the capital market line (CML) and the security market line (SML).

After reviewing studies on the CAPM and the APT, Vista decides to develop her own microeconomic multifactor model. She establishes a proxy for the market portfolio, then considers the importance of various factors in determining stock returns. She decides to use the following factors in her model:

§ Changes in payout ratios.

§ Credit rating changes.

§ Companies’ position in the business cycle.

§ Management tenure and qualifications.

In order to derive the CML, Vista needs the:

A)   expected market return, portfolio beta, and risk-free rate.

B)   portfolio beta, market variance, and expected market return.

C)   market variance, portfolio beta, risk-free rate, and expected portfolio return.

D)   risk-free rate, market variance, portfolio variance, and expected market return.

The correct answer was D)

The CML is derived by using the risk-free rate, portfolio variance (standard deviation), market variance (standard deviation), and expected market return to calculate expected portfolio returns.

23．Vista’s analysis of CAPM assumptions is flawed. Which of the following assumptions that Vista noted is not part of the CAPM?

A)   Markets are perfectly competitive.

B)   Represented by a multi-factor model.

C)   Investors use the Markowitz mean-variance framework.

D)   Unlimited risk-free lending and borrowing is permitted.

The correct answer was B)

The CAPM is represented by a single factor model with the factor being market risk. The APT is a multifactor model where several factors could be used to explain the model's returns.

24．Which of the following factors is least appropriate for Vista’s factor model?

A)   Changes in payout ratios.

B)   Credit rating changes.

C)   Companies’ position in the business cycle.

D)   Management tenure and qualifications.

The correct answer was C)

Microeconomic factors are factors measured by characteristics of the companies themselves, like P/E ratios or growth rates. Macroeconomic factors are economic influences on security returns. A company’s position in the business cycle is dependent on the cycle itself, and cannot be accurately measured by looking at a company’s fundamentals. Payout ratios, credit ratings, and management tenure are pieces of company-specific data suitable for use in a microeconomic factor model.

25．After further research on valuation models, Vista is most likely to use:

A)   the zero-beta CAPM because it does not require the assumption that investors can borrow at the risk-free rate.

B)   the traditional SML, assuming she had sufficient historical data to develop accurate beta estimates.

C)   discounted cash flows, despite the need to estimate future cash flows and terminal values.

D)   APT because it allows the use of a variety of factors.

The correct answer was C)

APT, the zero-beta CAPM, and the security market line (part of the CAPM) are all theoretical models in that they require the use of assumptions that are impossible to justify rationally. Discounted cash flows require some estimation, but the calculations are based on real, tangible data. In addition, DCF models are not difficult to test, and studies have shown that valuation strategies based on discounted cash flows can be successful at picking winning stocks. Since Vista is a literal thinker and prefers tangible solutions, she is most likely to use the discounted cash flow approach to valuation rather than a theoretical model.