1、8-1 Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 08 Index Models Multiple Choice Questions 1. As diversification increases, the total variance of a portfolio approaches A. 0. B. 1. C. th
2、e variance of the market portfolio. D. infinity. E. None of the options 2. As diversification increases, the standard deviation of a portfolio approaches A. 0. B. 1. C. infinity. D. the standard deviation of the market portfolio. E. None of the options 8-2 Copyright 2014 McGraw-Hill Education. All r
3、ights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 3. As diversification increases, the firm-specific risk of a portfolio approaches A. 0. B. 1. C. infinity. D. (n - 1) n. 4. As diversification increases, the unsystematic risk of a portfolio a
4、pproaches A. 1. B. 0. C. infinity. D. (n - 1) n. 5. As diversification increases, the unique risk of a portfolio approaches A. 1. B. 0. C. infinity. D. (n - 1) n. 6. The index model was first suggested by A. Graham. B. Markowitz. C. Miller. D. Sharpe. 8-3 Copyright 2014 McGraw-Hill Education. All ri
5、ghts reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7. A single-index model uses _ as a proxy for the systematic risk factor. A. a market index, such as the S (eA) = 0.20; (eB) = 0.10. The covariance between the returns on stocks A and B is A. 0
6、.0384. B. 0.0406. C. 0.1920. D. 0.0772. E. 0.4000. 8-4 Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 10. According to the index model, covariances among security pairs are A. due to the influence
7、 of a single common factor represented by the market index return. B. extremely difficult to calculate. C. related to industry-specific events. D. usually positive. E. due to the influence of a single common factor represented by the market index return and usually positive. 11. The intercept in the
8、 regression equations calculated by beta books is equal to A. in the CAPM. B. + rf(1 + ). C. + rf(1 - ). D. 1 - . 12. Analysts may use regression analysis to estimate the index model for a stock. When doing so, the slope of the regression line is an estimate of A. the of the asset. B. the of the ass
9、et. C. the of the asset. D. the of the asset. 8-5 Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 13. Analysts may use regression analysis to estimate the index model for a stock. When doing so, th
10、e intercept of the regression line is an estimate of A. the of the asset. B. the of the asset. C. the of the asset. D. the of the asset. 14. In a factor model, the return on a stock in a particular period will be related to A. firm-specific events. B. macroeconomic events. C. the error term. D. both
11、 firm-specific events and macroeconomic events. E. neither firm-specific events and macroeconomic events. 15. Rosenberg and Guy found that _ helped to predict a firms beta. A. the firms financial characteristics B. the firms industry group C. firm size D. the firms financial characteristics and the
12、firms industry group E. All of the options 8-6 Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 16. If the index model is valid, _ would be helpful in determining the covariance between assets GM an
13、d GE. A. GM B. GE C. M D. All of the options E. None of the options 17. If the index model is valid, _ would be helpful in determining the covariance between assets HPQ and KMP. A. HPQ B. KMP C. M D. All of the options E. None of the options 18. If the index model is valid, _ would be helpful in det
14、ermining the covariance between assets K and L. A. k B. L C. M D. All of the options E. None of the options 8-7 Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19. Rosenberg and Guy found that _ he
15、lped to predict firms betas. A. debt/asset ratios B. market capitalization C. variance of earnings D. All of the options E. None of the options 20. If a firms beta was calculated as 0.6 in a regression equation, a commonly used adjustment technique would provide an adjusted beta of A. less than 0.6
16、but greater than zero. B. between 0.6 and 1.0. C. between 1.0 and 1.6. D. greater than 1.6. E. zero or less. 21. If a firms beta was calculated as 0.8 in a regression equation, a commonly used adjustment technique would provide an adjusted beta of A. less than 0.8 but greater than zero. B. between 1
17、.0 and 1.8. C. between 0.8 and 1.0. D. greater than 1.8. E. zero or less. 8-8 Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 22. If a firms beta was calculated as 1.3 in a regression equation, a c
18、ommonly used adjustment technique would provide an adjusted beta of A. less than 1.0 but greater than zero. B. between 0.3 and 0.9. C. between 1.0 and 1.3. D. greater than 1.3. E. zero or less. 23. The beta of Exxon stock has been estimated as 1.6 using regression analysis on a sample of historical
19、returns. A commonly used adjustment technique would provide an adjusted beta of A. 1.20. B. 1.32. C. 1.13. D. 1.40. 24. The beta of Apple stock has been estimated as 2.3 using regression analysis on a sample of historical returns. A commonly used adjustment technique would provide an adjusted beta o
20、f A. 2.20. B. 1.87. C. 2.13. D. 1.66. 8-9 Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 25. The beta of JCP stock has been estimated as 1.2 using regression analysis on a sample of historical ret
21、urns. A commonly used adjustment technique would provide an adjusted beta of A. 1.20. B. 1.32. C. 1.13. D. 1.0. 26. Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained
22、by 150 investments. They will need to calculate _ expected returns and _ variances of returns. A. 150; 150 B. 150; 22500 C. 22500; 150 D. 22500; 22500 27. Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 100 stocks in order to construct a mean-va
23、riance efficient portfolio constrained by 100 investments. They will need to calculate _ expected returns and _ variances of returns. A. 100; 100 B. 100; 4950 C. 4950; 100 D. 4950; 4950 8-10 Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
24、written consent of McGraw-Hill Education. 28. Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments. They will need to calculate _ covariances. A. 12 B
25、. 150 C. 22,500 D. 11,175 29. Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 investments. They will need to calculate _ covariances. A. 125 B. 7,750 C. 15,625 D. 11,750 30. Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments. They will need to calculate _ covariances. A. 45 B. 100 C. 4,950 D. 10,000
