Questions from General Investment

Q: Briefly explain whether investors should expect a higher return from holding portfolio

Briefly explain whether investors should expect a higher return from holding portfolio A versus portfolio B under capital asset pricing theory (CAPM). Assume that both portfolios are fully diversified...

Q: Suppose there are two independent economic factors, M1 and M2.

Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 7%, and all stocks have independent firm-specific components with a standard deviation of 50%. Portfolios A and B a...

Q: The semistrong form of the efficient market hypothesis asserts that stock

The semistrong form of the efficient market hypothesis asserts that stock prices: a. Fully reflect all historical price information. b. Fully reflect all publicly available information. c. Fully r...

Q: A newly issued 10-year maturity, 4% coupon bond

A newly issued 10-year maturity, 4% coupon bond making annual coupon payments is sold to the public at a price of $800. What will be an investor’s taxable income from the bond over the coming year? Th...

Q: Assume that a company announces an unexpectedly large cash dividend to its

Assume that a company announces an unexpectedly large cash dividend to its shareholders. In an efficient market without information leakage, one might expect: a. An abnormal price change at the annou...

Q: Fencer issues two bonds with 20-year maturities. Both bonds

Fencer issues two bonds with 20-year maturities. Both bonds are callable at $1,050. The first bond is issued at a deep discount with a coupon rate of 4% and a price of $580 to yield 8.4%. The second b...

Q: Use the following data in answering below CFA Question; /

Use the following data in answering below CFA Question; Suppose investor “satisfaction” with a portfolio increases with expected return and decreases with variance...

Q: A “random walk” occurs when: a. Stock

A “random walk” occurs when: a. Stock price changes are random but predictable. b. Stock prices respond slowly to both new and old information. c. Future price changes are uncorrelated with past pr...

Q: Under the expectations hypothesis, if the yield curve is upward-

Under the expectations hypothesis, if the yield curve is upward-sloping, the market must expect an increase in short-term interest rates. True/false/uncertain? Why?

Q: A market anomaly refers to: a. An exogenous shock

A market anomaly refers to: a. An exogenous shock to the market that is sharp but not persistent. b. A price or volume event that is inconsistent with historical price or volume trends. c. A tradin...