1. From 2014 to 2016, stock prices rose 50%. Which of the following would be considered a logical explanation?
a) Lower market risk premiums
b) Higher growth rates
c) Lower risk free rates
d) All of the above are logical explanations
2. In order to reduce the risk of a portfolio, you would want to combine stocks with ______________.
a) The risk free rate
b) Low Standard Deviations
c) The market portfolio
d) Low Correlation Coefficients
3. Which of the following tends to increase the power of small, outside shareholders?
a) Cumulative voting
b) Founders Shares
c) Staggered Boards
d) Supermajority voting
4. You’d want to buy a stock if______________.
a) It had a positive Jensen’s Alpha.
b) Its required return is lower than its expected return.
c) Its price were less than its value
d) All of the above are characteristics of stocks you’d want to buy.
5. The Capital Asset Pricing Model makes all of these assumptions except ____________?
a) Investors hold a widely diversified portfolio like the market portfolio
b) That there are no taxes or transaction costs
c) Investors can borrow and lend at the risk-free rate
d) All of these are assumptions of the CAPM