Capital Asset Pricing Model and Answer Score Explanation Essay example
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Assignment 8
25
Tuesday
Jun 2013
Posted by preguntasdemiscursos in finance ≈ Leave a …show more content…
(10 points) The PSI20 is an index of the 20 largest market capitalization stocks traded on the Euronext Lisbon Stock Exchange in Portugal. You think that 20 stocks may not give you enough diversification, so you want to expand that list to the top 60 stocks. By doing this, what is the percentage increase in the UNIQUE relations between any two stocks in your portfolio that you will have to worry about? (No more than two decimals in the percentage drop, but do not enter the % sign.)
Your Answer Score Explanation
831.58 10.00
Total 10.00/10.00
Question Explanation
An important calculation to emphasize the importance of relations among stocks in a portfolio.
Question 7
(10 points) The CAPM states that the realized/actual return on an asset in any period will be the risk free rate plus beta times the market risk premium.
Your Answer Score Explanation
False 10.00 Correct. You understand a simple but important difference.
Total 10.00/10.00
Question Explanation
A simple, but widely misunderstood, difference between actual outcome(s) and the expected one in an uncertain word.
Question 8
(10 points) Suppose CAPM works, and you know that the expected returns on IBM and Google are estimated to be 11% and 9.5%, respectively. You have just calculated extremely reliable estimates of the

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