Exam 11: Risk and Return

A $36,000 portfolio is invested in a risk-free security and two stocks.The beta of Stock A is 1.29 while the beta of Stock B is .90.One-half of the portfolio is invested in the risk-free security.How much is invested in Stock A if the beta of the portfolio is .58?

Which one of the following statements is correct?

You currently own a portfolio valued at $76,000 that is equally as risky as the market.Given the information below, what is the beta of Stock C?

What is the beta of the following portfolio?

The security market line is defined as a positively sloped straight line that displays the relationship between the:

Midwest Fastener Supply stock is expected to return 16 percent in a booming economy, 12percent in a normal economy, and -3 percent in a recession.The probabilities of an economic boom, normal state, or recession are 12 percent, 80 percent, and 8 percent, respectively.What is the expected rate of return on this stock?

Which one of the following is the best example of an announcement that is most apt to result in an unexpected return?

Popular Finger Foods stock is expected to return 20 percent in a booming economy, 14 percent in a normal economy, and -5 percent in a recession.The probabilities of an economic boom, normal state, or recession are 8 percent, 87 percent, and 5percent, respectively.What is the expected rate of return on this stock?

Which one of the following best exemplifies unsystematic risk?

Malone Imports stock should return 12 percent in a boom, 10 percent in a normal economy, and 2 percent in a recession.The probabilities of a boom, normal economy, and recession are 5 percent, 85 percent, and 10 percent, respectively.What is the variance of the returns on this stock?

Systematic risk is defined as:

Bama Entertainment has common stock with a beta of 1.22.The market risk premium is 8.1 percent and the risk-free rate is 3.9 percent.What is the expected return on this stock?

A stock is expected to return 13 percent in an economic boom, 10 percent in a normal economy, and 3 percent in a recessionary economy.Which one of the following will lower the overall expected rate of return on this stock?

Systematic risk is:

Currently, you own a portfolio comprised of the following three securities.How much of the riskiest security should you sell and replace with risk-free securities if you want your portfolio beta to equal 90 percent of the market beta?

A stock has a beta of 0.95, the expected return on the market is 13.25, and the risk-free rate is 3.66.What must the expected return on this stock be?

Assume the economy has an 6 percent chance of booming, am 8 percent chance of being recessionary, and being normal the remainder of the time.A stock is expected to return 22.5 percent in a boom, 11.5 percent in a normal economy, and -8 percent in a recession.What is the expected rate of return on this stock?

The amount of systematic risk present in a particular risky asset relative to that in an average risky asset is measured by the:

Which one of these represents systematic risk?

Portfolio diversification eliminates: