1. In chapter 9 of the Random Walk book, the author is unwilling to abandon the CAPM for all of the following reasons except:
a. stable returns are preferable to volatile returns
b. some definitions of beta are strong predictors of returns
c. betas can be a useful investments tool, especially during sharp market swings
d. systematic risk is best measured by the standard deviation of expected returns
2. The value of a stock is a function of Select one:
a. future returns.
b. historic dividend growth rate.
c. most recent earnings per share.
d. past returns.
3. A P/E ratio depends on
1. the firm's dividends
2. the price of the stock
3. the firm's per share earnings Select one:
a. 1 and 2
b. 1 and 3
c. 2 and 3
d. all of these choices
4. In chapter nine of the Random Walk book discusses the Capital Asset Pricing model. According to CAPM, when an investor takes on more unsystematic risk Select one:
a. he will reap more reward in terms of a higher return
b. he will not reap any reward in terms of a higher return
c. the overall return of the portfolio will decrease
5. High P/E ratios can be expected when investors expect Select one:
a. a high rate of growth in earnings.
b. low earnings. relative to market prices.
c. high interest rates.
d. a bear market.
6. The Mayan Calendar Co. intends to liquidate all of its assets at the end of 2012 and pay out the proceeds as one giant dividend of $1,000 per share. For an investor who required a 10% rate of return, the value of Mayan stock on January 1 2012 would have been Select one:
a. $1,100.
b. $1,000.
c. $909.09.
d. Such a stock would have no value at all.
7. In Chapter 8 of the Random Walk book the author discusses diversifying a portfolio by adding international stocks. Malkiel states that Select one:
a. A portfolio of fifty U.S. stocks has less risk than a portfolio of fifty international stocks
b. A portfolio of fifty international stocks has less risk than a portfolio of fifty U.S. stocks
c. A portfolio of fifty U.S. stocks has the same leel of risk as a portfolio of fifty international stocks.