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Securities A and B have forecasted returns of 14% and 18% over the next 12 months. During the same period, the market (M) is expected to generate returns of 16%. The risk-free rate is 6% , and β = 1.1. The forecasted price for next year for security A is $ 60. According to the CAPM, what should A sell for today

A. $51.72.
B. $54.05.
C. $51.28.

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An analyst gathered the following information about stock A and the market index: Estimated future rate of retum for stock A 16% Covariance of stock Awith the market index 600.0 standard deviation of the market index 20.0 Risk-free rate of retum 5% Yield of zero coupon Treasury bond 6% Expected future rate of return for the market index 13% Based only on the information above, the analyst"s most appropriate conclusion is that the stock is:

A. overvalued because the required rate of return for the stock is 15.5%.
B. overvalued because the required rate of return for the stock is 17.0%.
C. undervalued because the required rate of return for the stock is 15.5%.

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An investor has identified the following possible portfolios. Which portfolio lies to the right of the efficient frontier Portfolio Expected Return Standard Deviation A 18% 35% B 14% 20% C 13% 24%

A. Ａ.
B. Ｃ.
C. Ｂ.

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Robert Johnson, CFA, is considering the purchase of two stocks from different industry. Each stock has an expected return of 12.5 percent and an expected standard deviation of returns of 16 percent. Which of the following statements Johnson said about the two stocks is most accurate

A. Regardless of the weights selected or the correlation between the returns of the two stocks, the expected standard deviation of a portfolio composed of the two stocks will be less than 16%.
B. Rational investor should not invest in the two stocks because their returns obviously exhibit positive correlation.
C. Regardless of the weights selected or the correlation between the returns of the two stocks, the expected return of a portfolio composed of the two stocks will be 12.5 %.

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With respect to the security market line, if two risky assets have the same covariance with the market portfolio but have different estimated rates of return, the most accurate conclusion is that the two risky assets have:

A. the same amount of systematic risk, and both assets are properly valued.
B. different amount of systematic risk, and both assets are properly valued.
C. The same amount of systematic risk, and at least one of the assets is either overvalued or undervalued.

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A. $51.72. B. $54.05. C. $51.28.

An investor has identified the following possible portfolios. Which portfolio lies to the right of the efficient frontier Portfolio Expected Return Standard Deviation A 18% 35% B 14% 20% C 13% 24%

Robert Johnson, CFA, is considering the purchase of two stocks from different industry. Each stock has an expected return of 12.5 percent and an expected standard deviation of returns of 16 percent. Which of the following statements Johnson said about the two stocks is most accurate

With respect to the security market line, if two risky assets have the same covariance with the market portfolio but have different estimated rates of return, the most accurate conclusion is that the two risky assets have:

A. $51.72.
B. $54.05.
C. $51.28.