pls ans all if not DO NOT take

1.

Which of the following statements about CML and SML is FALSE?

		Securities that plot below the CML has no value to investors
		Securities that plot below the SML are undervalued.
		Investors choose their portfolio on the CML.
		Securities on the SML have the same Sharpe Ratio.
		None of the above

2.

The expected return and betas for three stocks are given below:

Stock	EXPECTED RETURN (%)	BETA
A	10	1.4
B	9	1.2
C	12	1.7

Market returns, R _m, is 8% and risk-free rate is 3%. Which of the three stocks is undervalued according to the CAPM?

		A
		B
		C
		None
		There is not enough information to answer this question

3.

1. The risk-free rate is 5%, and the expected market rate of return is 13%. A stock with a beta of 1.2 is selling for $20 and will pay a dividend of $1 at the end of the year. If the stock is expected to be priced at $22 at year-end, it is _______.

   		fairly valued
   		undervalued
   		overvalued
   		cannot determine

4.

If the CAPM is valid and all portfolios are priced correctly, which of the situations below is/are NOT possible? Consider each situation independently, and assume the risk-free rate is 5%.

Situation A				Situation B
Portfolio	Expected Return	BETA		Portfolio	Expected Return	BETA
RISKFREE	5%	0		RISKFREE	5%	0
MARKET	10%	1.0		ABC	13%	1.0
ABC	11.5%	1.3		XYZ	21%	1.5

		Situation A only
		Situation B only
		Situation A and B
		Neither situation