Question

In a world where the assumptions of CAPM applied which of the following statements would be...

In a world where the assumptions of CAPM applied which of the following statements would be correct? I. All investors will hold the market portfolio, which includes all the risky assets in the world. II. Investors' complete portfolio will vary depending on their risk aversion. III. The return per unit of risk will be identical for all individual assets. IV. The market portfolio will be on the efficient frontier and it will be the optimal risky portfolio. Group of answer choicesI,

II and III only. I, III and IV only. I, II and IV only. I, II, III and IV. II, III and IV only. PreviousNext

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

ANSWER : I,II,III,IV

The explanations is as follwos:

A Market portfolio is any index which consists of all types of stocks, so option I is correct.

If you are investing in the stock market you will have certain utility to bear the risk whcih may be lower and i can take high risk, so it depends on the investor, so option II is correct.

The Beta will compare with the market which givens for a portfolio it is same for all.so option III is correct

The last option is also correct because tangent drawn to the efficient frontier gives the optimal portfolio. The graph is drawn between the Beta and RETURN which is of market

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
A. Evaluating the CAPM Which one of the following statements implied by the CAPM is not...
A. Evaluating the CAPM Which one of the following statements implied by the CAPM is not true? Systematic risk is the risk that matters. Investors should diversify. A similar well diversified portfolio will be suitable for a wide range of investors All investors hold the market portfolio of risky assets. B. Fama-French Model Work by Eugene Fama and Kenneth French indicates that stock returns are a function of three factors. Which of the following are the factors they propose? I....
When the CAPM assumptions hold, which of the following statements is FALSE? a) The capital market...
When the CAPM assumptions hold, which of the following statements is FALSE? a) The capital market line goes through a risk-free asset b) The capital market line goes through the market portfolio c) The efficient frontier goes through a risk-free asset d) The security market line goes through the market portfolio
Which of the following statements are FALSE? The CAPM identifies the market portfolio as the efficient...
Which of the following statements are FALSE? The CAPM identifies the market portfolio as the efficient portfolio. If some security were not part of the efficient portfolio, then every investor would want to own it, and demand for this security would increase causing its expected return to fall until it is no longer an attractive investment. If investors have homogeneous expectations, then each investor will identify the same portfolio as having the highest Sharpe ratio in the economy. The market...
18. Which of the following statements about the minimum variance portfolio of all risky securities are...
18. Which of the following statements about the minimum variance portfolio of all risky securities are valid? (Assume short sales are allowed.) i. Its variance must be lower than those of all other securities or portfolios. ii. Its expected return can be lower than the risk-free rate. iii. It may be the optimal risky portfolio. iv. It must include all individual securities. 19. Assume that expected returns and standard deviations for all securities (including the risk-free rate for borrowing and...
Which of the following statements regarding a portfolio of two risky assets (with almost equal weights)...
Which of the following statements regarding a portfolio of two risky assets (with almost equal weights) is true? A. For this portfolio, if investors do not invest in a risk-free asset, the feasible set simply includes the upward curve starting from the global minimum variance portfolio. B. A portfolio without a risk-free asset cannot earn a higher return than a portfolio with risk-free assets if these two portfolios have the same risk. C. If investors invest in a risk-free asset,...
True false: 1. Under the CAPM, investors require a rate of return that is proportional to...
True false: 1. Under the CAPM, investors require a rate of return that is proportional to the volatility of each asset.   2. The simple average of all equity betas in a market must equal exactly 1, by construction. 3. All assets and portfolios that plot on the Capital Market Line have returns that are perfectly positively correlated with the market portfolio. 4. A firm that operates in rural areas, and is more exposed to bush fire risk, will have a...
Which of the following statements are true regarding UNSYSTEMATIC RISK? I. Unsystematic risk can be effectively...
Which of the following statements are true regarding UNSYSTEMATIC RISK? I. Unsystematic risk can be effectively eliminated through portfolio diversification. II. Unsystematic is compensated for by a risk premium. III. Unsystematic risk is measured by beta. IV. As rational investors hold well-diversified portfolios, the market will not pay a risk premium for holding unsystematic risk. A. I and IV only B. II only C. II and III only. D. I, III, and IV only. E. III and IV only. You...
The efficient frontier of risky assets is i) the portion of the investment opportunity set that...
The efficient frontier of risky assets is i) the portion of the investment opportunity set that lies above the global minimum variance portfolio. ii) the portion of the investment opportunity set that represents the highest standard deviations. iii) the portion of the investment opportunity set which includes the portfolios with the lowest standard deviation. iv) the set of portfolios that have zero standard deviation. Group of answer choices (i) (iv) (ii) (i) and (ii) are true. (iii)
QUESTION 1 Under the CAPM, investors require a rate of return that is proportional to the...
QUESTION 1 Under the CAPM, investors require a rate of return that is proportional to the volatility of each asset.   True False QUESTION 2 The simple average of all equity betas in a market must equal exactly 1, by construction. True False QUESTION 3 All assets and portfolios that plot on the Capital Market Line have returns that are perfectly positively correlated with the market portfolio. True False QUESTION 4 A firm that operates in rural areas, and is more...
A- The CAPM says that the average return on a stock should be at least the...
A- The CAPM says that the average return on a stock should be at least the return on a riskless asset and compensation for bearing choose one of the following: 1-firm-specific risk. 2-market risk. 3-firm-specific and market risk. 4-alpha risk. 5- beta risk. 6- alpha and beta risks. B- Since the market portfolio beta is equal to ---------------------a stock with a beta of 1.00 is---------------------the market portfolio. choose two of the following for each blink: 1- 0 2- 1 3-100...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT