What is it prediction of the CAPM with respect to the expected return on any security?
What will be an ideal response?
The CAPM implies that the expected return of any security equals the risk-free rate plus the beta of the security multiplied by the market risk premium. The beta of the security is the covariance of its return with the return on the market portfolio divided by the variance of the market portfolio return. Hence, the risk premium on an individual security is a function of its covariance with the market portfolio.
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Which statement is not true when deciding on whether to use balanced or unbalanced scales when developing a non-comparative itemized rating scale?
A) The scale should be balanced to obtain objective data. B) In a balanced scale, the number of favorable and unfavorable categories are equal. C) If the distribution of responses is likely to be skewed, either positively or negatively, a balanced scale with more categories in the direction of skewness may be appropriate. D) If an unbalanced scale is used, the nature and degree of unbalance in the scale should be taken into account in data analysis.
Otto is planning for his son's college education to begin ten years from today. He estimates the end-of-the-year tuition, books, and living expenses to be $10,000 per year for a four-year degree
How much must Otto deposit today, at an interest rate of 12 percent, for his son to be able to withdraw $10,000 per year for four years of college? A) $12,880 B) $ 9,780 C) $40,000 D) $18,950