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CAPM- Capital Asset Pricing Model Flashcards | StudBud
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CAPM- Capital Asset Pricing Model
A stock with a beta of 1.5 would have _______ risk than the market
The formula for CAPM is.
CAPM- Capital Asset Pricing Model
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MBA 634
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Answers
1
The formula for CAPM is.
Rf + B*(MRP)
None of the above
Rf + B ( Rf- MRP)
FCF/k-g
2
A stock with a beta of 1.5 would have _______ risk than the market
Equal
More
Less
Unable to determine
3
An example of unsystematic risk is:
Controlable risk
Interest rate risk
None of the above
Business risk
4
What are the things investors should be compensated for?
Time value and risk
FCF and TV
Risk and return
Time value and interest rate
5
The spot is also referred to as the
Bond rate
Interest rate
None of the above
Active rate
6
Duff and Phelps recommend the use of a risk free rate in 2016 of
4%
2%
8%
6%
7
CAPM can be used in the Weighted Average Cost of Capital to estimate the
Cost of structure
Cost of capital
Cost of equity
Cost of debt
8
The normal return of the market is based on historical returns from the
S&P 500
Return on savings bonds
NASDAQ
Dow Jones
9
A normal yield curve
Slopes up gradually from left to right
Is flat
Is steep
It depends
10
Published betas
Estimate company profits
All of the above
May differ due to data collection and timely
Are always the same
11
The risk free rate is usually derived from
Long term government bond rates
The exchange rate
The investor's estimate
Stock market returns
12
An investor who takes greater risk expects
A cash flow
A profit
A loss
A greater return
13
The newest superhero in finance is known as
The Market Maker
Risk Free Man
Dr. Betaman
Dr. Cash Flow
14
Beta is the measure of a stock's
Losses
Return
Price
Volatility
15
Drug companies typically have a beta of
Greater than 1.0
1.0
Less than zero (negative beta)
Less than 1.0
16
Duff and Phelps recommend a Market Risk Premium for 2016 of
9.5%
5.5%
None of the above
4.5%
17
The Market Risk Premium is the difference between the return fo the market and the
Rate of return from stocks
Risk free rate
Risk rate
Rate of returns from foreign investment
18
Systematic risk is
Non-existent for most investments
Uncontrollable
Controlable
Due to computer systems
19
A stock with a beta of 1.0 would have similar risk to the:
Terminal value
Investor Portfolio
Interest rate risk
S&P 500
20
Volatility can be used as a proxy for a stock's
Refund
Risk
Return
Reward
