Question Details

managerial actions





True/False


 .	In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are interested in ex ante (future) data.

a.	True
b.	False

Medium:


 .	If investors are risk averse and hold only one stock, we can conclude that the required rate of return on a stock whose standard deviation is 0.21 will be greater than the required return on a stock whose standard deviation is 0.10.  However, if stocks are held in portfolios, it is possible that the required return could be higher on the low standard deviation stock.

a.	True
b.	False

	
 .	The CAPM is a multi-period model which takes account of differences in securities’ maturities, and it can be used to determine the required rate of return for any given level of systematic risk.

a.	True
b.	False

	
 .	The SML relates required returns to firms’ systematic (or market) risk. The slope and intercept of this line can be influenced by managerial actions.

a.	True
b.	False

	
 .	The Y-axis intercept of the SML indicates the return on an individual asset when the realized return on an average (b = 1) stock is zero.

a.	True
b.	False





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