Reading 53: Portfolio Risk and Return: Part II-LOS f 习题精选 2011, following, including, required, security

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Session 12: Portfolio Management
Reading 53: Portfolio Risk and Return: Part II

LOS f: Explain the capital asset pricing model (CAPM), including the required assumptions, and the security market line (SML).

 

 

Which of the following is NOT an assumption of capital market theory?

A) The capital markets are in equilibrium.

B) Interest rates never change from period to period.

C) Investors can lend at the risk-free rate, but borrow at a higher rate.

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Capital market theory assumes that investors can borrow or lend at the risk-free rate. The other statements are basic assumptions of capital market theory.

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Which of the following is an assumption of capital market theory? All investors:

A) see the same risk/return distribution for a given stock.

B) select portfolios that lie above the efficient frontier to optimize the risk-return relationship.

C) have multiple-period time horizons.

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All investors select portfolios that lie along the efficient frontier, based on their utility functions. All investors have the same one-period time horizon, and have the same risk/return expectations.

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Which is NOT an assumption of capital market theory?

A) Investments are not divisible.

B) There are no taxes or transaction costs.

C) There is no inflation.

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Capital market theory assumes that all investments are infinitely divisible. The other statements are basic assumptions of capital market theory.

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Which of the following statements regarding the Capital Asset Pricing Model is least accurate?

A) It is useful for determining an appropriate discount rate.

B) It is when the security market line (SML) and capital market line (CML) converge.

C) Its accuracy depends upon the accuracy of the beta estimates.

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The CML plots expected return versus standard deviation risk. The SML plots expected return versus beta risk. Therefore, they are lines that are plotted in different two-dimensional spaces and will not converge.

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When the market is in equilibrium:

A) all assets plot on the SML.

B) all assets plot on the CML.

C) investors own 100% of the market portfolio.

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When the market is in equilibrium, expected returns equal required returns. Since this means that all assets are correctly priced, all assets plot on the SML.

By definition, all stocks and portfolios other than the market portfolio fall below the CML. (Only the market portfolio is efficient.