Question

If you were to consider the CAPM as a one-factor model, then the factor would be...

If you were to consider the CAPM as a one-factor model, then the factor would be the:

rate of inflation.

market risk premium.

GNP.

risk-free rate.

individual beta of each security or portfolio.   

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

CAPM or capital asset pricing model states that the expected return = Risk free rate + Beta*Market Risk Premium

There can be other factors like beta and their associated premiums

If you were to consider the CAPM as a one-factor model, then the factor would be the:

individual beta of each security or portfolio.   

Beta drives the risk premium and ultimately the expected return

hence the answer is

individual beta of each security or portfolio.   

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1)Consider the multifactor APT with two factors. The risk premium on the factor 1 portfolio is...
1)Consider the multifactor APT with two factors. The risk premium on the factor 1 portfolio is 3%. The risk-free rate of return is 6%. The risk-premium on factor 2 is 7.75%. Suppose that a security A has an expected return of 18.4%, a beta of 1.4 on factor 1 and a beta of .8 on factor 2. Is there an arbitrage portfolio? If not, prove it, if yes exhibit it? 2)In the APT model, what is the nonsystematic standard deviation...
a.) Consider a one-factor economy. Portfolio A has a beta of 1.0 on the factor, and...
a.) Consider a one-factor economy. Portfolio A has a beta of 1.0 on the factor, and portfolio B has a beta of 2.0 on the factor. The expected returns on portfolios A and B are 11% and 17%, respectively. Assume that the risk-free rate is 6%, and that arbitrage opportunities exist. Suppose you invested $100,000 in the risk-free asset, $100,000 in portfolio B, and sold short $200,000 of portfolio A. What would be your expected profit from this strategy? b.)...
According to CAPM, there is linear relationship between the assets but APT assumes linear relationship between...
According to CAPM, there is linear relationship between the assets but APT assumes linear relationship between the risk factors. APT- Arbitrage Pricing Theory is a method of estimating the price of the assets. This theory is based on macroeconomics, market and security specific factors. Formula- E(rj) = rf + bj1 RP1 +bj2 RP2 + bj3 RP3....... Where E(rj) = Asset's expected rate of return, rf = risk free rate, bj = the senstivity of the asset's return to the factor,...
1.) According to the CAPM, what is the expected return on a security given a market...
1.) According to the CAPM, what is the expected return on a security given a market risk premium of 9%, a stock beta of 0.57, and a risk free interest rate of 1%? Put the answers in decimal place. 2.)   Consider the CAPM. The risk-free rate is 2% and the expected return on the market is 14%. What is the expected return on a portfolio with a beta of 0.5?   (Put answers in decimal points instead of percentage) 3.) A...
Manipulating CAPM   Use the basic equation for the capital asset pricing model ​(CAPM​) to work each...
Manipulating CAPM   Use the basic equation for the capital asset pricing model ​(CAPM​) to work each of the following problems. a.  Find the required return for an asset with a beta of 0.54 when the​ risk-free rate and market return are 6 ​% and 8 % ​, respectively. b.  Find the ​risk-free rate for a firm with a required return of 6.368 ​% and a beta of 0.26 when the market return is 11 % . c.  Find the market...
Consider the following multifactor (APT) model of security returns for a particular stock. Factor Factor Beta...
Consider the following multifactor (APT) model of security returns for a particular stock. Factor Factor Beta Factor Risk Premium Inflation 1.1 9 % Industrial production 0.7 11 Oil prices 0.3 7 a. If T-bills currently offer a 6% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) b. Suppose that the market expects the values for the three...
What is the CAPM required return of a portfolio with 40% invested in the market portfolio,...
What is the CAPM required return of a portfolio with 40% invested in the market portfolio, 18% invested in risk-free assets, and the rest invested in a stock with a beta of 2.3? The risk free rate is 0.8% and the expected market risk premium is 5.8%. Answer in percent, rounded to two decimal places.
According to the CAPM, what is the market risk premium given an expected return on a...
According to the CAPM, what is the market risk premium given an expected return on a security of 17.0%, a stock beta of 1.4, and a risk-free interest rate of 10%? 10.00% 14.00% 5.00% 7.70%
The two-factor model on a stock provides a risk premium for exposure to market risk of...
The two-factor model on a stock provides a risk premium for exposure to market risk of 9%, a risk premium for exposure to interest rate risk of (-1.3%), and a risk-free rate of 3.5%. The beta for exposure to market risk is 1, and the beta for exposure to interest rate risk is also 1. What is the expected return on the stock? a. 15.2% b. 11.2% c. 13.8% d. 8.7%
Manipulating CAPM???Use the basic equation for the capital asset pricing model ?(CAPM?) to work each of...
Manipulating CAPM???Use the basic equation for the capital asset pricing model ?(CAPM?) to work each of the following problems. a.??Find the required return for an asset with a beta of 0.810.81 when the? risk-free rate and market return are 99?% and 17 %17%?, respectively. b.??Find the ?risk-free rate for a firm with a required return of 12.98212.982?% and a beta of 1.891.89 when the market return is 10 %10%. c.??Find the market return for an asset with a required return...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT