Methods of Valuation – Corporate and Management Accounting MCQ

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The expected return of Security A is 22% while that of Security B is 24%. The beta of Security A is 0.86 while that of Security B is 1.24. What is a risk-free rate?

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Calculate the required return on the security from the following information:Standard deviation 2.5%Market standard deviation 2.0%The risk-free rate of return 13%Expected rate of return on market portfolio 15%The correlation coefficient of the portfolio with the market 0.8

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A financial consultant has gathered the following facts for H Ltd.The systematic risk of the firm is 1.4.182 days Treasury bill yield is 8%The expected yield on the market portfolio is 13%. Calculate expected returns based on the capital asset pricing model (CAPM).

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ABC Ltd. beta is 1.45. The rate of market return is 1696. The rate of return on government securities is 8%. What is the expected return as per Capital Asset Pricing Model? If the risk premium on the market goes up by 2.5% points, what would be the revised expected return on this stock?

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Pavan has invested in four securities. Amount invested and a beta of each security is as follows:Compute portfolio beta.

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You are analyzing the beta for ABC Ltd. and have divided the Company into four broad business groups, with market values and betas for each group.Estimate the beta for ABC Ltd. as a company.

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Return on Lucky Ltd. shares has a standard deviation of 2096, as against the standard deviation of the market at 1596. The correlation coefficient between the market and stock of XM Ltd. is 0.9. Compute the unsystematic risk of Lucky Ltd.’s shares.

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Return on XM Ltd. shares has a standard deviation of 23%, as against the standard deviation of the market at 19%. The correlation coefficient between the market and the stock of XM Ltd. is 0.8. Compute the systematic risk of XM Ltd.’s shares.

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Dividend for the last 4 years of Tara Ltd. was ₹ 7, ₹ 5, 12.8 & ₹ 10, and the market price was ₹ 120, ₹ 80, ₹ 130 & ₹ 150 respectively. What is the average return of the last 3 years considering capital gain and dividend?

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Return of last 5 years of listed security is 16.2%, 19.8%, 18%, 15% & 21%. Five years ago the price of the security was 120 per share.What is its holding period return?

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Return of last 5 years of listed security is 16.2%, 19.8%, 18%, 15% & 21%. Five years ago the price of the security was 120 per share. What is its average return?

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The actual return of GK Ltd. for the last four years is 20%, 14%, 17%, and 18%. GK Ltd. has a beta of 1.15. Return on the market portfolio is 15%. The risk-free rate of return is 6%. Compute Alpha value and decide whether to hold, buy, or sell the security?

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Yogesh invests ₹ 1,25,000 in shares of BABA Ltd., a listed company. At the end of the period investment value is ₹ 1,32,000. He gets a dividend of ₹ 8,000. Return from investment is –

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Suppose the risk-free rate is 4% and k is 2.5%. If an investor takes 13% risk, he can expect a return of –

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The APT is an equilibrium model developed by:

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In contrast to the capital asset pricing model, arbitrage pricing theory:

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____is also called specific risk.

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Systematic risk =?

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The positive alpha value indicates that –

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Systematic Risk is –

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The negative alpha value indicates that –

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Alpha is denoted by the symbol –

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Alpha is an indicator of the extent to which the –

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Capital asset pricing theory asserts that portfolio returns are best explained by:

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The beta of the risk-free asset is:

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According to the CAPM, overpriced securities have:

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If the required return as per CAPM is more than the expected return, then –

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Which of the following investment advice will you provide to your client investor if CAPM Return = Expected return?

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Market risk is also called:

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The Security Market Line (SML) is a line drawn on a chart that serves as a graphical representation of the Capital Asset Pricing Model, which shows different levels of ____ of various marketable securities plotted against the expected return.

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If the expected return is more than the required return as per CAPM, then –

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Which of the following investment advice will you provide to your client investor if CAPM Return > Expected return?

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Which of the following investment advice will you provide to your client investor if CAPM Return < Expected return?

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Capital Asset Pricing Model (CAPM) provides the link between –

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A beta of 0.8 for security would indicate that –

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A beta of 1.15 for security would indicate that –

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Investors should be agreeing to invest in riskier investments merely –

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Beta is a measure of __

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