Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Beta is which of the following:
A) standard deviation.
B) total risk.
C) Beta is the relationship which is between an investment's return, and the market return.
D) unsystematic risk.
When working with the CAPM, which of the following factors can be determined with the most precision?
a. The beta coefficient of "the market," which is the same as the beta of an average stock.
b. The beta coefficient, bi, of a relatively safe stock.
c. The market risk premium (RPM).
d. The most appropriate risk-free rate, rRF.
e. The expected rate of return on the market, rM.
Provide a descriptive formula for each of the following (e.g., Total risk =?+?):
a. Total risk=
b. Discount rate=
c. Adjusted NPV=
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- The additional return over the risk-free rate needed to compensate investors for assuming an average amount of risk. a. Market Risk Premium b. Risk-free rate С. Stock's beta O d. Security Market Line e. Required Return on Stockarrow_forwardWhich of the following measures the total risk of a portfolio? A. Standard Deviation B. Correlation Coefficient C. Beta D. Alphaarrow_forwardWhat is a risk measure? a Alpha b Required return on the market portfolio c Standard deviation of historical returnsarrow_forward
- It is a risk adjusted performance measure that represents the average return on a portfolio. a. sharpe ratio b. Treynor indexarrow_forwardWhen working with the CAPM, which of the following factors can be determined with the most precision? a. The most appropriate risk-free rate, rRF. b. The market risk premium (RPM). c. The beta coefficient, bi, of a relatively safe stock. d. The expected rate of return on the market, rM. e. The beta coefficient of "the market," which is the same as the beta of an average stock.arrow_forwardExercises: a. The standard deviation of returns is 0.30 for Stock A and 0.20 for Stock B. The covariance between the returns of A and B is 0.006. The correlation of returns between A and B is: b. Explain the differences between systemic risk and unsystematic risk, give additional examples c. Compare and contrast the Capital Market Line and Security Market Line d. The covariance of the market's returns with the stock's returns is 0.008. The standard deviation of the market's returns is 0.08, and the standard deviation of the stock's returns is 0. 11. What is the correlation coefficient of the returns of the stock and the returns of the market? e. According to the CAPM, what is the required rate of return for a stock with a beta of 0.7, when the risk-free rate is 7% and the expected market rate of return is 14%arrow_forward
- Which of the following measures reflects the excess return earned on a portfolio per unit of its systematic risk a. Treynor’s measure b. Sharpe’s measure c. Jensen’s measure d. Total measurearrow_forwardThe slope of the Security Market Line equals to ____, and the slope of Capital Allocation Line equals to____. Select one: A. Beta; Sharpe Ratio B. Market Risk Premium; Sharpe Ratio C. Risk free rate; Volatility D. Market Risk Premium; Volatilityarrow_forward1. Calculate the Expected Return, Standard Deviation, and Beta for each stock. 2. Which stock has more systematic risk and which one has more unsystematic risk? Which stock is "riskier"? Explain your answer completely. Use excel to show formulas and calculationsarrow_forward
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