16%/8% = 2.0 Test Your Investment Quotient 1. Portfolio Return (LO3, CFAI) Accor

Question

16%/8% = 2.0 Test Your Investment Quotient 1. Portfolio Return (LO3, CFAI) According to the CAPM, what is the rate of return of a portfolio with a beta of 1? a. Between RM and R b. The risk-free rate, R C. Beta × (RM-R) d. The return on the market, R 2. Stock Return (LO1, CFA4) The return on a stock is said to have which two of the following basic parts? a. An expected return and an unexpected return. b. A measurable return and an unmeasurable return. c. A predicted return and a forecast return. d. A total return and a partial return. ponents (L.01, CFA4) A news announcement about a stock is said to have which two of the following parts? a. An expected part and a surprise b. Public information and private information c. Financial information and product information. d. A good part and a bad part. 4. News Effects (LOL, CFA4) A company announces that its earnings have incrasol 50

Explanation / Answer

According to CAPM, Rate of return of a portfolio = Rf + Beta * ( Rm - Rf)

when Beta = 1, Rate of return of a portfolio = Rf + ( Rm - Rf) = Rm

Hence D is correct

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2 A is correct

There is an expected part which market gurus predict and a surprise part which adjusts the predicted return of a stock.

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3 C is correct.

All press releases and news announcement about a stock contain some financial information about performance of the stock or promise of performance and some information about the product offerings of the company.

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