Question : 91. The basic tenet of the CAPM that a stock’s expected : 1284287

91. The basic tenet of the CAPM is that a stock’s expected risk premium should be: 
A. greater than the expected market return.
B. proportionate to the market return.
C. proportionate to the stock’s beta.
D. greater than the risk-free rate of return.

92. What effect might operating leverage be expected to have on a project’s beta? 
A. Beta will increase.
B. Beta will decrease.
C. Beta will not be affected.
D. The effect depends on the market risk premium.

93. The correct opportunity cost for a project is determined to be 15% and the project is expected to generate $1 million in cash flows at the end of the next 4 years after an initial outlay of $3 million. Based on this information, the project would plot: 
A. above the security market line.
B. below the security market line.
C. on the security market line.
D. on the security market line, with a beta of 1.0.

94. A project is determined to have equal probability of generating $1 million annually or $500,000 annually for 4 years. The initial outlay is $2 million. The expected return on Treasury bills is 6% and the market risk premium is 10%. What is the highest project beta that will justify acceptance of the project? 
A. 0.245
B. 1.000
C. 1.245
D. 2.310

95. Which of the following portfolios might be expected to exhibit less unique risk? 
A. Five random stocks; portfolio beta = .8
B. Three random stocks; portfolio beta = 1.2
C. Ten random stocks; portfolio beta = 1.0
D. Twelve random stocks; portfolio beta unknown

96. If the plotting of a portfolio’s returns against returns on the market index produces a tight pattern, then: 
A. the portfolio appears to be well diversified.
B. the portfolio has a beta of 0.
C. the portfolio has very little systematic risk.
D. the portfolio has a very low market risk premium.

97. If an investor’s portfolio is allocated 75% to the market portfolio and 25% to Treasury bills, then the investor should expect to receive: 
A. the risk-free rate plus 75% of the expected return on the market.
B. the risk-free rate plus 75% of the expected market risk premium.
C. 75% of the expected return on the market.
D. 25% of the risk-free rate plus 75% of the expected market risk premium.

98. How is it possible to invest only in the market portfolio yet have a portfolio beta of 1.5? 
A. Don’t diversify away the unique risks.
B. Purchase only aggressive stocks for the portfolio.
C. Purchase only stocks with high levels of systematic risk.
D. Borrow funds to increase your investment.

99. The CAPM provides a model of determining expected security returns that is: 
A. precise in its calculations of risk premiums.
B. imprecise, but generally an acceptable guideline.
C. excellent for high beta stocks.
D. excellent for well-diversified portfolios.

100. Macro events only are reflected in the performance of the market portfolio because: 
A. the market portfolio has no individual firms.
B. only macro events are tracked by economists.
C. unique risks have been diversified away.
D. firm-specific events would be too numerous to list.