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Questions and Answers
What is the value of the beta of security i, βi?
What is the value of the beta of security i, βi?
- $0.01104$
- $0.16$
- $0.4$
- $0.3$ (correct)
What is the estimate of the covariance between RTF and KIU?
What is the estimate of the covariance between RTF and KIU?
- $0.0225$
- $0.05625$
- $0.0405$ (correct)
- $0.0675$
Based on the capital asset pricing model (CAPM), is JKU overvalued, under or fairly valued?
Based on the capital asset pricing model (CAPM), is JKU overvalued, under or fairly valued?
- Overvalued
- Undervalued (correct)
- Fairly valued
- Cannot be determined from the given information
Which of the following is the correct formula for calculating the beta of a security, $\beta_i$?
Which of the following is the correct formula for calculating the beta of a security, $\beta_i$?
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What is the formula for the covariance between two stocks, $\text{Cov}(R_{RTF}, R_{KIU})$?
What is the formula for the covariance between two stocks, $\text{Cov}(R_{RTF}, R_{KIU})$?
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What is the relationship between the correlation coefficient $\rho_{i,m}$ and the beta $\beta_i$ of a security?
What is the relationship between the correlation coefficient $\rho_{i,m}$ and the beta $\beta_i$ of a security?
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If the expected return of the market is 12% and the risk-free rate is 5%, what must the expected return of JKU be for it to be fairly valued according to the CAPM?
If the expected return of the market is 12% and the risk-free rate is 5%, what must the expected return of JKU be for it to be fairly valued according to the CAPM?
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