Please explain why 1) The stock market is perfectly efficient if: a) it is possi
ID: 2627601 • Letter: P
Question
Please explain why
1) The stock market is perfectly efficient if:
a) it is possible to earn a risk-free arbitrage profit by simultaneously buying and selling the same asset
b) any security offering higher historical rates of return necessarily entails greater risk
c) any security offering a higher expected rate of return necessarily entails greater risk.
d) only risk-free assets give a 0% expected rate of return.
2) Firm-specific risk reflects volatility tied to:
a) rising interest rates.
b) falling unemployment.
c) failed patent application
d) election-year jitters.
3) Investors who have combined the MSCI EAFE Index with the S&P 500 index between the years 1970 to 2009 have exposed themselves to less risk and received greater returns than those investors who held only the S&P 500.
True or false
4)If you buy the ETF with the ticker DOG you more exposed to market risk than firm specific risk?
True or false
Can you confirm if the answers below are correct for a different set of question.
4) The Beta of a company measures how risky its common stock is relative to:
a) a proxy for the entire market for financial assets
b) the equity of a single industry
c) the Bond Market
d) the equity of a direct competitor
(I got A)
5) Beta is:
a) an absolute measure of risk.
b) a measure of total risk.
c) a relative measure of risk.
d) a measure of unsystematic risk.
(I got C)
6) The correct discount rate used to find the value of Microsoft is based on a discount rate that incorporates only firm specific risk since MSFT is not a portfolio but a single asset.
True
False
(I got true)
THANK YOU
Explanation / Answer
A
B
T
F
A
C
T