The market value of common stock IS primarıly based on A. the firm's future earnings C. Total assets. B. Book value. D. retained earmings 8. AT-bill pays 5 percent rate of return. Would risk-averse investors invest inarisky portfolio that pays 8 percent with a probability of 40 percent or 3 percent with a probability of 60 percent? A. Yes, because they are rewarded with a risk premium. B. No, because they are not rewarded with a nisk premium. C. No, because the risk premium is smal D. Cannot be determined. e. None of the above. 9. A firm has a P/E ratio of 18 and a ROE of 13% and a market to book value of A.0.64 B. 0.92 C. 2.34 D. 1.56 E. none of the above
The market value of common stock IS primarıly based on A. the firm's future earnings C. Total assets. B. Book value. D. retained earmings 8. AT-bill pays 5 percent rate of return. Would risk-averse investors invest inarisky portfolio that pays 8 percent with a probability of 40 percent or 3 percent with a probability of 60 percent? A. Yes, because they are rewarded with a risk premium. B. No, because they are not rewarded with a nisk premium. C. No, because the risk premium is smal D. Cannot be determined. e. None of the above. 9. A firm has a P/E ratio of 18 and a ROE of 13% and a market to book value of A.0.64 B. 0.92 C. 2.34 D. 1.56 E. none of the above
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
. The market value of common stock IS primarıly based on
A. the firm's future earnings
C. Total assets.
B. Book value.
D. retained earmings
8. AT-bill pays 5 percent rate of return . Would risk-averse investors invest inarisky portfolio
that pays 8 percent with a probability of 40 percent or 3 percent with a probability of 60
percent?
A. Yes, because they are rewarded with a risk premium.
B. No, because they are not rewarded with a nisk premium.
C. No, because the risk premium is smal
D. Cannot be determined. e. None of the above.
9. A firm has a P/E ratio of 18 and a ROE of 13% and a market to book value of
A.0.64
B. 0.92
C. 2.34
D. 1.56
E. none of the above
10. Your opinion is that security A has an expected rate of return of 0.125. It has a beta of 1.5.
The risk-free rate is 0.04 and the market expoctod rate of return is 0.11. According to the
Capital Asset Pricing Model , this security is
A. Underpriced.
D. cannot be determined from data provided.
C. fairly priced.
E. none of the above.
B. overpriced.
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