WEEK 4 - CAPM

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7 Questions

Which of the following is correct?

It is possible that an asset has a negative beta, and its return would be less than the riskfree rate.

. You own a stock portfolio invested 10 percent in Stock Q , 35 percent in Stock R , 20 percent in Stock S , and 35 percent in Stock T . The betas for these four stocks are 0.75, 1.90, 1.38, and 1.16, respectively. What is the portfolio beta?

1.42

If a security has a beta of 1.4, then as the market return increased by 10%, the security:

Increases by 14%

A stock has an expected return of 13.1 percent, a beta of 1.28, and the expected return on the market is 11 percent. What must the risk-free rate be?

3.5%

Which of the following is NOT an assumption of CAPM?

There are taxes and transaction costs to account for in the capital markets

Which of the following is TRUE?

The beta of the market portfolio is 1

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.65 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?

1.35

Test your knowledge of portfolio beta, security beta, expected return, and CAPM assumptions with this quiz. Questions cover topics such as calculating portfolio beta, security beta, risk-free rate, and the assumptions of CAPM.

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