5. If a stock\'s required or expected rate of return is 22%, its average market

Question

5. If a stock's required or expected rate of return is 22%, its average market return is 18%, and the interest yield on 10-year US Treasury Bonds is 4%, what is the stock's Beta
6. Select any type of company (e.g., your employer or the company for your term project) and set up the equation for calculating the required or expected rate of return using the APT model. Use your own estimates for the weighting of each factor, so that the equation accurately generates a required or expected rate of return that is mathematically correct. [Helpful hint: do not spend too much time or "overthink" this problem as this merely a hypothetical exercise to measure your comprehension on how the APT model can be applied in real world situations.] ALSO you are not called upon to calculate an E(r) but to set up the equation with the appropriate weighting factors only
7. Which of the following is correct? (Points : 2)
(1) A change in the inherent risk of an investment will cause a movement along the Security Market Line.
(2) A change in investors' attitudes toward risk will cause a change in the market risk premium, and cause a change in the slope of the Security Market Line.
(3) A change in the inherent risk of an investment will cause the Security Market Line to shift.
(4) A change in expected real growth, capital market conditions or expected rate of inflation will cause a parallel shift of the Security Market Line.
1, 2, 3, and 4.
1, 2, and 4.

1 and 2 only.
8. ________________ and ______________ are examples of "Top Down" investment strategy
9. Low Price/Book, low P/E and consumer & services are characteristics associated with value stocks
10. Which of the following ratios is NOT a leverage ratio? (Points : 2)
Total Debt/Total Assets
Debt-to-Equity Ratio
Current Ratio
Long Term Debt to Total Capital Ratio
Equity to Total Capital Ratio

12. Which of the active management strategies in the fundamental analysis category is most suitable for structuring an investment portfolio? Selecting individual stocks to buy or sell
13. The "single-risk factor" CAPM approach has more assumptions versus the "multiple-risk factor" APT approach. (Points : 1)
True
False
List the 4 decisions involved or constructing an investment strategy

18. Why is the required rate of return the most dynamic or important variable used in valuation?

19. Here are the cash flow summaries for two companies

Explanation / Answer

5)
22% =4% + Beta*(18%-4%)
18%/14% = beta
Beta = 1.29

7)
1, 2, and 4.

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.