Question
In: Finance
According to CAPM, the amount of reward an investor receives for bearing the risk of an...
According to CAPM, the amount of reward an investor receives for bearing the risk of an individual security depends upon the:
| beta of the security and the market rate of return. | |
| risk free rate, the market rate of return, and the standard deviation of the security. | |
| market risk premium and the amount of systematic risk inherent in the security. | |
| standard deviation of the security and the risk-free rate of return. | |
| amount of total risk assumed and the market risk premium. |
Solutions
Expert Solution
market risk premium and the amount of systematic risk inherent in the security
jeff jeffy answered 2 years agoRelated Solutions
1. The risk premium is _____. Check all that apply: the reward for bearing risk the...
1. The risk premium is _____.
Check all that apply:
the reward for bearing risk
the difference between the expected rate of return on an asset
and the risk-free rate
normally zero for risky assets
normally positive for risky assets
2. An investor wants to invest money in Treasury bills and a
risky fund managed by Infinity Capital. The investor wants to
achieve an expected return of 10% on his complete portfolio.
Infinity Capital has an expected return of 9%...
The systematic principle states that the reward for bearing risk depends only on the diversifiable risk...
The
systematic principle states that the reward for bearing risk
depends only on the diversifiable risk of an investment. True or
false?
Securities and portfolios lie above SML are underpricing. True
or false?
When we apply WACC to evaluate projects with different levels
of risk, we could correctly reject low risk and accept high risk
projects. True or false?
The reward for bearing risk is called the: a. geometric return b. average return c. real...
The
reward for bearing risk is called the:
a. geometric return
b. average return
c. real return
d. risk premium
e. total retum .
Which of the following statement is correct about risk? A. Financial markets reward you for bearing...
Which of the following statement is correct about risk?
A. Financial markets reward you for bearing systematic risk.
B. Fluctuation in oil price is an unsystematic risk.
C. Systematic risk can be eliminated by proper
diversification.
D. As you invest more in Coca Cola stocks, your return will
increase due to higher risk.
Evaluate the risk / reward position to an investor when purchasing stock during an initial public...
Evaluate the risk / reward position to an investor when
purchasing stock during an initial public offering, indicating
under what circumstances you would advise an investor to do so.
According to the capital asset pricing model (CAPM) the only risk that matters is “market risk”,...
According to the capital asset pricing model (CAPM) the only
risk that matters is “market risk”, captured by beta (β). What type
of risk is this and what does it entail? Why are all other types of
risk less important? Do you agree with the CAPM view on risk or
not?
According to the capital asset pricing model (CAPM) the only risk that matters is “market risk”,...
According to the capital asset pricing model (CAPM) the only
risk that matters is “market risk”, captured by beta (β). What type
of risk is this and what does it entail? Why are all other types of
risk less important? Do you agree with the CAPM view on risk or
not?
Suppose the CAPM holds. You know that the average investor has a degree of risk aversion...
Suppose the CAPM holds. You know that the average investor has a
degree of risk aversion of 2.9. The current risk free rate is
0.017, the inflation is estimated at 0.027, and the volatility of
the market is 0.162. What is the market risk premium?
According to the Capital Asset Pricing Model (CAPM), investors will have to face “diversified risk” and “non-diversifiable risk”.
Using an example from your organisation, differentiate between
“period costs” and “product costs”.According to the Capital Asset Pricing Model (CAPM), investors
will have to face “diversified risk” and “non-diversifiable risk”.Distinguish between the two.
Diversification can increase the level of systematic risk. True False According to the CAPM, which of...
Diversification can increase the level of systematic risk.
True
False
According to the CAPM, which of the following is NOT related to
the expected return on a stock?
A.
pure time value of money as measured by the risk-free rate
B.
amount of systematic risk as measured by beta
C.
the reward for systematic risk as measured by the market risk
premium
D.
amount of risk as measured by the standard deviation
If a stock does not pay dividends which...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
- 1) Alternative compiled code sequence using instructions in classes A, B, C. What is the average...
- An asset is purchased on January 1 for $48,700. It is expected to have a useful...
- Do we have any online or offline tool to convert c and cpp programs into MIPS...
ADVERTISEMENT