FINANCE CH 12 Q 1 True or False? Explain and qualify. a. Investors demand higher

Question

FINANCE CH 12 Q 1 True or False? Explain and qualify. a. Investors demand higher expected rates of return on stocks with more variable rates of return. b. The capital asset pricing model predicts that a security with a beta of zero will provide an expected return of zero. c. An investor who puts $10,000 in Treasury bills and $20,000 in the market portfolio will have a portfolio beta of 2.0 d. Investors demand higher expected rates of return from stocks with returns that are highly exposed to macroecoomic changes. e. Investors demand higher expected rates of return from stocks with returns that are very sensitive to fluctuations in the stock market.

Explanation / Answer

a. true b. false.....security with beta 0 will provide return=risk free rate c. false......his beta would be 20000/30000 = 0.67 d. true e. true

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