Investments 9Th Canadian Edition By Bodie-Test Bank

Test Bank For Investments 9Th Canadian Edition By Bodie

ISBN-10:053845217X , ISBN-13:978-0538452175

Chapter 09

The Capital Asset Pricing Theory

Multiple Choice Questions
1. In the framework of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is
A. unique risk.
B. beta.
C. standard deviation of returns.
D. variance of returns.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

2. In the context of the Capital Asset Pricing Model (CAPM), the pertinent risk is
A. unique risk.
B. systematic risk.
C. standard deviation of returns.
D. variance of returns.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

3. Considering the Capital Asset Pricing Model (CAPM), the relevant risk is
A. unique risk.
B. market risk.
C. standard deviation of returns.
D. variance of returns.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

4. According to the Capital Asset Pricing Model (CAPM), the rate of return of a well-diversified portfolio is a function of
A. market risk.
B. unsystematic risk.
C. unique risk.
D. reinvestment risk.
E. None of the options are correct.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

5. As per the Capital Asset Pricing Model (CAPM), the rate of return of a well-diversified portfolio is influenced by
A. beta risk.
B. unsystematic risk.
C. unique risk.
D. reinvestment risk.
E. None of the options are correct.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

6. According to the Capital Asset Pricing Model (CAPM), the rate of return of a well-diversified portfolio is determined by
A. systematic risk.
B. unsystematic risk.
C. unique risk.
D. reinvestment risk.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

7. The market portfolio has a beta of
A. 0.
B. 1.
C. -1.
D. 0.5.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

8. Assuming the risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively. According to the capital asset pricing model (CAPM), the expected return on security X with a beta of 1.2 equals
A. 0.06.
B. 0.144.
C. 0.12.
D. 0.132.
E. 0.18.

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

9. Provided the risk-free rate and the expected market rate of return are 0.056 and 0.125, respectively. In line with the capital asset pricing model (CAPM), the expected return on a security with a beta of 1.25 is
A. 0.142.
B. 0.144.
C. 0.153.
D. 0.134.
E. 0.117.

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Simple
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model

10. Which statement is false regarding the market portfolio?
A. It comprises all publicly-traded financial assets.
B. It is situated on the efficient frontier.
C. All securities in the available portfolio are held proportionate to their market values.
D. It serves as the tangency point between the capital market line and the indifference curve.
E. All the options are correct.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 09-01 The Capital Asset Pricing Model.
Subject: 09-01 The Capital Asset Pricing Model