beta is 1, what is the likely result of a 2 per cent increase in the market index return?  A) A 2 per cent increase in the return on a specific share. B) A 2 per cent decrease in the return on a specific share. C) A 0.5% decrease in the return on a specific share. D) A 0.5% increase in the return on a specific share.

Suppose rRF = 6%, rM = 12%, and bi = 1.1. What is ri, the required rate of return on Stock i? Round your answer to one decimal place.   % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri?   rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point.     2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri?   rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same.     1. Now assume that rRF remains at 6%, but rM increases to 13%.…

The beta value of the Prime company’s share is 0.75. If the return on thecapital market as a whole increase by 5%, then what will be the change ofreturn of the Prime Company’s share?

IBC has the same beta as the overall market. If the expected return on the market is 5%, what is the expected return for IBC's stock? O A. Greater than 5%. O B. Less than 5%. O c. The same as 5%. O D. Less than 0%.

Q6. You would like to invest in two shares A and B. The return on these shares over the next year depends on the state of economy, which will be described as “Boom”, “Normal”, “Slow” and “Recession”. The table below shows the probability of each of these states of economy, and the expected return on each share given each possible state of the economy. The correlation coefficient between shares A and B is 0.5. State of the economy Probability A Return B Return Boom 0.20 0.25 0.21 Normal 0.40 0.16 0.12 Slow 0.25 0.10 0.08 Recession 0.15                    - 0.06 0.05   What is the expected return on A and B shares?   What is the standard deviation of A and B shares?   What is the expected return on portfolio comprised of 55% invested in share A and the balance in share B?   What is the standard deviation on portfolio comprised of 55% invested in share A and 45% invested in share B?

7. According to the CAPM, what is the expected rate of return for a stock with a beta of 1.2, when the risk-free rate is 6% and the market risk premium is 12%? A. 7.2%. B. 14.4%. C. 13.2%.

5) Two firms have 0.75 difference in their beta and 5% difference in their expected return, what is the implied price of beta, risk free rate and market return?

Suppose TRF = 4%, TM = 9%, and b = 1.1. a. What is n, the required rate of return on Stock i? Round your answer to one decimal place. % b. 1. Now suppose rar increases to 5%. The slope of the SML remains constant. How would this affect ry and n? I. ry will increase by 1 percentage point and n will remain the same. II. Both ry and r, will decrease by 1 percentage point. III. Both rm and r, will remain the same.. IV. Both r and r, will increase by 1 percentage point. V. r will remain the same and r, will increase by 1 percentage point. -Select- v 2. Now suppose rar decreases to 3%. The slope of the SML remains constant. How would this affect ry and n? I. TM will decrease by 1 percentage point and n will remain the same. II. rs will remain the same and n will decrease by 1 percentage point. III. Both ry and r, will increase by 1 percentage point. IV. Both ry and r, will remain the same. V. Both ry and r, will decrease by 1 percentage point. Select

risk-free rate have to be if they are correctly priced? (See Problems 19 and 20.) 11.4 CAPM Suppose the risk-free rate is 8 percent. The expected return on the market is 14 percent. If a particular stock has a beta of .60, what is its expected return based on the CAPM? If another stock has an expected return of 20 percent, what must its beta be? (See Problem 13.)

Suppose rRF = 6%, rM = 10%, and bi = 1.8. What is ri, the required rate of return on Stock i? Round your answer to one decimal place.   % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri?   Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point. rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point.     2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri?   Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same. rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point.     1. Now assume that rRF remains at 6%, but rM increases to 11%.…