Security A has a beta of .99, security B has a beta of 1.2, and security C has a
ID: 2633834 • Letter: S
Question
Security A has a beta of .99, security B has a beta of 1.2, and security C has a beta of -1.0. This information indicates that
security A has the highest degree of market risk.
security B has 20% more systematic risk than the market.
security C has the highest degree of market risk.
security C would be the best investment if a strong bull market is expected.
0.0.
+0.5.
+1.5.
+2.0.
True
False
True
False
Small company stocks are yielding 15.7% while the U.S. Treasury bill has a 4.3% yield and a bank savings account is yielding 3.8%. What is the risk premium on small company stocks
The risk-free rate of return is 2% while the market rate of return is 12%. Parson Company has a historical beta of .85. Today, the beta for Delta Company was adjusted to reflect internal changes in the structure of the company. The new beta is 1.38. What is the amount of the change in the expected rate of return for Delta Company based on this revision to beta
I and II only
III and IV only
II, III and IV only
I, II, and IV only
Explanation / Answer
Security A has a beta of .99, security B has a beta of 1.2, and security C has a beta of -1.0. This information indicates that-security C would be the best investment if a strong bull market is expected.
When the stock market has bottomed out and is beginning to recover, the best portfolio to own is the one with a beta of +2
Portfolios located on the efficient frontier may not be part of the feasible set.-True
A coefficient of determination of 0.6 means that 40% of the variation in a security's return is related to factors other than the security's relationship to the market-True
I, II, and IV only
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