BUS 401 WEEK 4 Quiz

BUS 401 WEEK 4 1. Question : Beta is estimated as the slope of a regression line fit to pairs of periodic returns, (rx, ry), where: Student Answer: rx is the return for a market index such as the S&P 500 Index. rx is the return for the stock being analyzed—for example, IBM’s return if we are estimating IBM’s beta. the slope measures the average return for the market portfolio for each percentage change in the value of the security of interest. ry is the return for the market index such as the S&P 500 Index. Instructor Explanation: The answer can be found in Section 9.2: Risk and Return. Points Received: 1 of 1 Comments: Question 2. Question : One way to think about the required rate of return is: Student Answer: as the highest return a risk-averse investor wants from an investment. as the risk-free rate of return plus a risk premium. as the historical rate of return plus a risk premium. as a comparison between the expected and historical rates of return. Instructor The answer can be found in Section 9.1: The Building Blocks of the