Chapter Thirteen Capital Market Equilibrium This chapter contains 43 multiple choice questions,19 short problems,and 9 longer problems. Multiple Choice 1.If one holds a diversified portfolio in which securities are held in the same relative proportions as in a broad market index,this is referred to as (a)eliminating (b)discounting risk (c)indexing (d)capitalizing Answer:(c) 2.The CAPM provides a way of estimating for use in a variety of financial applications. (a)actual rates of return (b)expected rates of return (c)expected standard deviation (d)actual standard deviation Answer:(b) 3.The CAPM may be used to provide (a)inputs to DCF valuation model for stocks (b)inputs to DCF valuation model for bonds (c)estimation of a"fair"rate of return on invested capital (d)both (a)and (c) Answer:(d) 13-113-1 Chapter Thirteen Capital Market Equilibrium This chapter contains 43 multiple choice questions, 19 short problems, and 9 longer problems. Multiple Choice 1. If one holds a diversified portfolio in which securities are held in the same relative proportions as in a broad market index, this is referred to as ________. (a) eliminating (b) discounting risk (c) indexing (d) capitalizing Answer: (c) 2. The CAPM provides a way of estimating ________ for use in a variety of financial applications. (a) actual rates of return (b) expected rates of return (c) expected standard deviation (d) actual standard deviation Answer: (b) 3. The CAPM may be used to provide ________. (a) inputs to DCF valuation model for stocks (b) inputs to DCF valuation model for bonds (c) estimation of a “fair” rate of return on invested capital (d) both (a) and (c) Answer: (d)