FIN402 Final Exam
Name: Kristie Foster
Due Week 5 - Day 7
Complete the following exam and post it to the Assignment section.
FINAL EXAM
1) A portfolio with a correlation of +1 is not a well-diversified portfolio. What must you as an investor do to structure a portfolio with negative correlation?
As an investor to structure a negative correlation portfolio, you must add more negative correlated stocks to the portfolio, which should offset the positive correlated stock. By doing this it will bring the positive correlated stock into negative correlated stocks.
2) What macroeconomic variable do you believe has the greatest impact on interest rates? Inflation? Briefly explain.
The macroeconomic variable that has the greatest impact on interest rates is money supply. If the money supply increases this can cause inflation, and to prevent this, the Federal Reserve raises the interest rate.
3) Compare and contrast the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT)? Which model is appropriate for calculating a stock's required rate of return? What is the Securities Market Line and which of the above models is it a product of?
CAPM and APT Theory both have expected return depends on risks originating from the influence of the economy and are not affected by the sole risk.
Securities Market line is a market that risk versus return of the whole market at a certain time and shows all risky marketable securities.
The Securities Market line is important with CAPM, but it is not involved with APT. CAPM ends all microeconomic risks, which is called return on market portfolio, but APT does not talk about issues.
Securities Market line is a market that risk versus return of the whole market at a certain time and shows all risky marketable securities.
4) What items should be considered in a financial statement analysis?
Financial statement analysis consists of 1) reformulating reported financial statements, 2) analysis and adjustments of measurement errors, and 3)
Due Week 5 - Day 7
Complete the following exam and post it to the Assignment section.
FINAL EXAM
1) A portfolio with a correlation of +1 is not a well-diversified portfolio. What must you as an investor do to structure a portfolio with negative correlation?
As an investor to structure a negative correlation portfolio, you must add more negative correlated stocks to the portfolio, which should offset the positive correlated stock. By doing this it will bring the positive correlated stock into negative correlated stocks.
2) What macroeconomic variable do you believe has the greatest impact on interest rates? Inflation? Briefly explain.
The macroeconomic variable that has the greatest impact on interest rates is money supply. If the money supply increases this can cause inflation, and to prevent this, the Federal Reserve raises the interest rate.
3) Compare and contrast the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT)? Which model is appropriate for calculating a stock's required rate of return? What is the Securities Market Line and which of the above models is it a product of?
CAPM and APT Theory both have expected return depends on risks originating from the influence of the economy and are not affected by the sole risk.
Securities Market line is a market that risk versus return of the whole market at a certain time and shows all risky marketable securities.
The Securities Market line is important with CAPM, but it is not involved with APT. CAPM ends all microeconomic risks, which is called return on market portfolio, but APT does not talk about issues.
Securities Market line is a market that risk versus return of the whole market at a certain time and shows all risky marketable securities.
4) What items should be considered in a financial statement analysis?
Financial statement analysis consists of 1) reformulating reported financial statements, 2) analysis and adjustments of measurement errors, and 3)