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A student has identified the CAPM and DDM as important formulas for finding a stock's required return and price, respectively. Other things remaining equal, a surprise change in which of the following statistics will increase the stock's price? A stock's price is likely to rise when there's a surprise: Select one: O a. Rise in the risk free rate. ob. Fall in the market risk premium. O C. Rise in the stock's beta. O d. Fall in the stock's expected dividend. O e Fall in the stock's expected dividend growth rate. Clear my choice Fairly-priced individual stocks plot: Select one: O a. Above the security market line (SML). O b. On the SML. C. Below the SML. O d. Above the capital market line (CML). O e. On the CML. Clear my choice The next few questions will be based on the same table and statistics that follow. To save you re-reading everything again in these subsequent questions, note that none of the following details will change such as the risk free rate, MRP, cash or trucks, but more items may be added to the table. A firm has only 2 assets on its balance sheet with the below market values and CAPM betas. The risk free rate is 3% pa and the market risk premium is 5% pa. Assume that the CAPM is correct and all assets are fairly priced. Beta Selected Company Details Item Market value ($m) Cash asset 0.5 Truck asset 0.5 0 2 Which of the following statements is NOT correct? Select one: O a. If the market portfolio suddenly rose by 1%, then the expected market value of the cash would be unchanged. ob. If the market portfolio suddenly rose by 1%, then the trucks' expected market value would rise 2% to be worth $0.01m more. . If the market portfolio suddenly rose by 1%, then the firm's total assets' expected market value would rise 1% to be worth $0.01m more. d. The firm's total asset beta is 1 and required return on assets (or WACC before tax) is 8% pa. O e. The trucks' required return is 19% pa

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