Chapter 09 - The Capital Asset Pricing Model
17. According to the Capital Asset Pricing Model (CAPM), fairly priced securities A. have positive betas. B. have zero alphas. C. have negative betas. D. have positive alphas. E. have non-zero alphas.
18. According to the Capital Asset Pricing Model (CAPM), underpriced securities A. have positive betas. B. have zero alphas. C. have negative betas. D. have positive alphas. E. have negative alphas.
19. According to the Capital Asset Pricing Model (CAPM), overpriced securities A. have positive betas. B. have zero alphas. C. have negative alphas. D. have positive alphas. E. have negative betas.
20. According to the Capital Asset Pricing Model (CAPM), A. a security with a positive alpha is considered overpriced. B. a security with a zero alpha is considered to be a good buy. C. a security with a negative alpha is considered to be a good buy. D. a security with a positive alpha is considered to be underpriced. E. a security with a positive beta is considered to be underpriced.
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Chapter 09 - The Capital Asset Pricing Model
21. According to the Capital Asset Pricing Model (CAPM), which one of the following statements is false?
A. The expected rate of return on a security increases in direct proportion to a decrease in the risk-free rate.
B. The expected rate of return on a security increases as its beta increases. C. A fairly priced security has an alpha of zero.
D. In equilibrium, all securities lie on the security market line. E. All of these are correct.
22. In a well diversified portfolio A. market risk is negligible. B. systematic risk is negligible. C. unsystematic risk is negligible. D. nondiver