Corporate Finance Study Set 12

Business

Quiz 12 :

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Quiz 12 :

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

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A factor is a variable that:
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A

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Which of the following statements is true?
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B

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Which of the following is true about the impact on market price of a security when a company makes an announcement and the market has discounted the news?
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Answer:

E

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Systematic risk is defined as:
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The unexpected return on a security, U, is made up of:
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If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, I, would result in a change in any security return of:
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For a diversified portfolio including a large number of stocks,:
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If company A makes a new product discovery and their stock rises 5% this will have:
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Based on a multi-factor APT model, the concept of portfolio diversification is to minimize which one of the following?
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The term Corr(R, T) = 0 tells us that:
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The single factor APT model that resembles the market model uses _____________ as the single factor.
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Both the APT and the CAPM imply a positive relationship between expected return and risk. The APT views risk:
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In normal market conditions or when the market is rising if a security has a negative beta:
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Shareholders discount many corporate announcements because of their prior expectations. If an announcement causes the price to change it will mostly be driven by:
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In a portfolio of risky assets the response to a factor, Fi, can easily be determined by:
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In the equation R = img + U, the three symbols stand for:
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Assume that the single factor APT model applies and a portfolio exists such that 2/3 of the funds are invested in Security Q and the rest in the risk-free asset. Security Q has a beta of 1.5. The portfolio has a beta of:
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The systematic response coefficient for productivity, P, would produce an unexpected change in any security return of ________ if the expected rate of productivity was 1.5% and the actual rate was 2.25%.
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The betas along with the factors in the APT adjust the expected return for:
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In the One Factor (APT) Model, the characteristic line to estimate i passes through the origin, unlike the estimate used in the CAPM because:
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