11. You run a regression of a stock's returns versus a market index and find the following: Based on the data, you know that the stock _____.

a) has a beta precisely equal to .890

b) earned a positive alpha that is statistically significantly different from zero

c) has no systematic risk

d) has a beta that is likely to be anything between .6541 and 1.465 inclusive

12. The expected return of the risky-asset portfolio with minimum variance is _________.

a) zero

b) the market rate of return

c) The answer cannot be determined from the information given.

d) the risk-free rate

.

33. Suppose the yield on short-term government securities (perceived to be risk-free) is about 6%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 13.0%. According to the capital asset pricing model:

a.	What is the expected return on the market portfolio? (Round your answer to 1 decimal place.)

Expected rate of return

%

b.	What would be the expected return on a zero-beta stock?

Expected rate of return

%

Suppose you consider buying a share of stock at a price of $105. The stock is expected to pay a dividend of $9 next year and to sell then for $108. The stock risk has been evaluated at = .5.

c-1.	Using the SML, calculate the fair rate of return for a stock with a = 0.5.

Fair rate of return

%

c-2.	Calculate the expected rate of return, using the expected price and dividend for next year. (Round your answer to 2 decimal places.)

Expected rate of return

%

c-3.

Is the stock overpriced or underpriced?

	Underpriced
	Overpriced