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Due to its risk characteristics compared to the ordinary
- lower
- higher
- same amount?
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- If there is a stock which is substantially overvalued, where it should plot relatively to the SML? Critically explain what should happen to that stock in equilibrium if a competitive market.a. What is the relationship between the expected return of a stock and its fair expected return? When is a stock underpriced, overpriced, or fairly priced?Which of the following is TRUE? You should choose a stock with the greater Jensen’s alpha Lower Treynor ratio indicates better risk adjusted performance Lower Sharpe ratio indicates greater level of risk for the same level of risk-adjusted return Higher Sharpe ratio indicates lower return for the same level of risk
- If a stock has a higher volatility, would your broker would want to set the maintenance margin percent higher or lower?Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT? a. Stock B must have a higher dividend yield than Stock A. b. Stock A must have a higher dividend yield than Stock B. c. If Stock A has a higher dividend yield than Stock B, its expected capital gains yield must be lower than Stock B's. d. Stock A must have both a higher dividend yield and a higher capital gains yield than Stock B. e. If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock B's.A stock's standard deviation determines how the stock affects the riskiness of a diversified portfolio; therefore, it is a better measure of a stock's relevant risk than is the beta-coefficient, which measures total, or stand-alone, risk.Choices:a. TRUEb. FALSE
- If the fair value of a stock is more than its market value, which of the following is a reasonable conclusion? a. The stock has a low level of risk b. The stock offers a high dividend payout ratio c. The market is undervaluing the stock d. The market is overvaluing the stockExplain why both put and call options are worth more if the stockreturn standard deviation is higher but put and call options areaffected oppositely by the stock price.If investors’ aversion to risk increased, would the risk premium on a high-beta stockincrease by more or less than that on a low-beta stock? Explain.
- Which of the following statements is CORRECT? a. Lower beta stocks have higher required returns. b. A stock's beta indicates its diversifiable risk. c. Diversifiable risk cannot be completely diversified away. d. Two securities with the same stand-alone risk must have the same betas. e. The slope of the security market line is equal to the market risk premium.In efficient markets, the rate of return on a stock should be: A. always greater than the risk-free rate B. Less than zero C. Related to the systemic risk of the stock D. Zero; no stock should earn a positive returnIn a market cap -weighted index, a higher number of shares outstanding will definitely translate into higher portfolio weight. Group of answer choices True False
