whether following statement is true or false- "Stock with Beta of zero offers an expected rate of return of zero." Introduction: Beta of a stock represents the sensitivity of its return with the change in the market return.

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Answer 1

Question

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

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Are the following true or false? Explain.a. Stocks with a beta of zero offer an expected rate of return of zero.b. The CAPM implies that investors require a higher return to hold highly volatile securities.c. You can construct a portfolio with beta of .75 by investing .75 of the investment budget in T-bills and the remainder in the market portfolio.

Are the following true or false? Explain. Stocks with a beta of zero offer an expected rate of return of zero. The CAPM implies that investors require a higher return to hold highly volatile securities. You can construct a portfolio with beta of .75 by investing .75 of the investment budget in T-bills and the remainder in the market portfolio.

Indicate whether the following statements are true or false. a. Investors demand higher expected rates of return on stocks with more variable rates of return. multiple choice 1 True False b. The CAPM predicts that a security with a beta of 0 will offer a zero expected return. multiple choice 2 True False c. An investor who puts $10,000 in Treasury bills and $20,000 in the market portfolio will have a beta of 2.0. multiple choice 3 True False d. Investors demand higher expected rates of return from stocks with returns that are highly exposed to macroeconomic risks. multiple choice 4 True False e. Investors demand higher expected rates of return from stocks with returns that are very sensitive to fluctuations in the stock market. multiple choice 5 True False

Answer 2

Question

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Expert Solution & Answer

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See solution

Answer 3

Question

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Expert Solution & Answer

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Answer 4

Question

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Expert Solution & Answer

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Answer 5

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Answer 6

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Answer 7

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Answer 8

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Answer 9

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Answer 10

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Answer 11

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Answer 12

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Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 9 - Prob. 1PS Ch. 9 - Prob. 2PS Ch. 9 - Prob. 3PS Ch. 9 - Prob. 4PS Ch. 9 - Prob. 5PS Ch. 9 - Prob. 6PS Ch. 9 - Prob. 7PS Ch. 9 - Prob. 8PS Ch. 9 - Prob. 9PS Ch. 9 - Prob. 10PS

whether following statement is true or false- "Stock with Beta of zero offers an expected rate of return of zero." Introduction: Beta of a stock represents the sensitivity of its return with the change in the market return.

Solution Summary: The author explains that a risk free stock such as T-bills has beta of zero as their return will not change due to change in the market return.

Concept explainers

Videos

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Want to see the full answer?

Chapter 9 Solutions

whether following statement is true or false- "Stock with Beta of zero offers an expected rate of return of zero." Introduction: Beta of a stock represents the sensitivity of its return with the change in the market return.

Solution Summary: The author explains that a risk free stock such as T-bills has beta of zero as their return will not change due to change in the market return.

Concept explainers

Videos

To determine: whether following statement is true or false- "Stock with Beta of zero offers an expected rate of return of zero." Introduction: Beta of a stock represents the sensitivity of its return with the change in the market return.

(C) To determine: whether following statement is true or false- "You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio." Introduction: Beta of the portfolio is the weighted average beta.

Want to see the full answer?

Chapter 9 Solutions

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.