The following portfolio has an expected return of ________% and a beta of ________. $\begin{array}{llll} \text { Security }&\$ \text { Invested } & E(R) &\text { Beta }\\ \mathrm{A} & \$ 30,000 & 16.20 \% & 1.12 \\ \mathrm{~B} & \$ 24,000 & 10.50 \% & 1.38 \\ \mathrm{C} & \$ 26.000 & 11.80 \% & 1.33 \end{array}$

A) 12.45; 1.38 B) 12.84; 1.39 C) 13.06; 1.27 D) 13.39; 1.40 E) 13.45; 1.32 A) 12.45; 1.38 B) 12.84; 1.39 C) 13.06; 1.27 D) 13.39; 1.40 E) 13.45; 1.32

The following portfolio has an expected return of ________% and a beta of ________. $\begin{array}{llrl} \text { Security }& \$ \text { Invested }&E(R) & \text { Beta }\\ \text { A } & \$ 40,000 & 9.00 \% & 1.05 \\ \text { B } & \$ 34,000 & 10.50 \% & 1.33 \\ \text { C } & \$ 26.000 & 11.80 \% & 1.22 \end{array}$

A) 10.12; 1.38 B) 10.24; 1.19 C) 11.06; 1.27 D) 12.39; 1.40 E) 12.45; 1.32 A) 10.12; 1.38 B) 10.24; 1.19 C) 11.06; 1.27 D) 12.39; 1.40 E) 12.45; 1.32

What is the covariance of Security A to the market given the following information? \[\begin{array} { c r r } \text { Year } & \text { R(a) } & \text { R(m) } \\ 1 & 35 & 28 \\ 2 & - 30 & - 8 \\ 3 & 20 & 16 \end{array}\]

A) 605.0 B) 614.1 C) 620.0 D) 623.5 E) 640.6 A) 605.0 B) 614.1 C) 620.0 D) 623.5 E) 640.6

Exam 12: Return, Risk, and the Security Market Line

You own three stocks which have betas of 1.16, 1.34, and 1.02. You would like to add a fourth security such that your portfolio beta will match that of the market. Given this situation, the new security:

(Multiple Choice)

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Question 21

Design Interior's stock has an expected return of 10% and a beta of 1.1. The market return is 9.5% and the risk-free rate is 2.0%. This stock is because the CAPM return for the stock is %.

(Multiple Choice)

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Question 22

Which one of the following is most commonly used as the measure of the overall market rate of return?

(Multiple Choice)

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Question 23

Which one of the following is the best example of a risk associated with stock ownership?

(Multiple Choice)

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Question 24

The common stock of Blasco Books has a standard deviation of 13.3% as compared to the market standard deviation of 11.3%. The covariance of this stock with the market is .0193. What is the beta of Blasco Books' stock?

(Multiple Choice)

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Question 25

The following portfolio has an expected return of % and a beta of . Security \ Invested E(R) Beta \ 30,000 16.20\% 1.12 \ 24,000 10.50\% 1.38 \ 26.000 11.80\% 1.33

(Multiple Choice)

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Question 26

Which one of the following terms is a measure of the tendency of two things to move or vary together?

(Multiple Choice)

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Question 27

Which one of the following is the type of risk that only affects either a single firm or a small number of firms?

(Multiple Choice)

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Question 28

Western Exports stock has a standard deviation of 15.6% and a covariance with the market of .0150. The market has a standard deviation of 13.7%. What is the correlation of this stock with the market?

(Multiple Choice)

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Question 29

The following portfolio has an expected return of % and a beta of . Security \ Invested E(R) Beta A \ 40,000 9.00\% 1.05 B \ 34,000 10.50\% 1.33 C \ 26.000 11.80\% 1.22

(Multiple Choice)

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Question 30

Which one of the following announcements is most apt to cause the price of a firm's stock to increase?

(Multiple Choice)

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Question 31

A portfolio beta is computed as which one of the following?

(Multiple Choice)

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Question 32

The risk-free rate is 2.1%, the market rate is 11.5%, and the expected return on a stock is 17.32%. What is the beta of the stock?

(Multiple Choice)

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Question 33

What is the covariance of Security A to the market given the following information? Year R(a) R(m) 1 35 28 2 -30 -8 3 20 16

(Multiple Choice)

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Question 34

Laura has one risk-free asset and one risky stock in her portfolio. The risk-free asset has an expected return of 3.2%. The risky asset has a beta of 1.3 and an expected return of 14.9%. What is the expected return on the portfolio if the portfolio beta is .975?

(Multiple Choice)

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Question 35

A stock has an expected return of 15.10% and a beta of 1.30. What is the risk-free rate if the market rate is 13.1%?

(Multiple Choice)

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Question 36

Which one of the following is the best example of systematic risk?

(Multiple Choice)

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Question 37

Uptown Markets stock has a standard deviation of 16.8% and a covariance with the market of .02. The market has a standard deviation of 13.7%. What is the correlation of this stock with the market?

(Multiple Choice)

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Question 38

Which one of the following has the highest expected risk premium?

(Multiple Choice)

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Question 39

Which one of the following qualifies as diversifiable risk?

(Multiple Choice)

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Question 40

Exam 12: Return, Risk, and the Security Market Line

You own three stocks which have betas of 1.16, 1.34, and 1.02. You would like to add a fourth security such that your portfolio beta will match that of the market. Given this situation, the new security:

Design Interior's stock has an expected return of 10% and a beta of 1.1. The market return is 9.5% and the risk-free rate is 2.0%. This stock is ________ because the CAPM return for the stock is ________%.

Which one of the following is most commonly used as the measure of the overall market rate of return?

Which one of the following is the best example of a risk associated with stock ownership?

The common stock of Blasco Books has a standard deviation of 13.3% as compared to the market standard deviation of 11.3%. The covariance of this stock with the market is .0193. What is the beta of Blasco Books' stock?

The following portfolio has an expected return of ________% and a beta of ________. Security \ Invested E(R) Beta \ 30,000 16.20\% 1.12 \ 24,000 10.50\% 1.38 \ 26.000 11.80\% 1.33

Which one of the following terms is a measure of the tendency of two things to move or vary together?

Which one of the following is the type of risk that only affects either a single firm or a small number of firms?

Western Exports stock has a standard deviation of 15.6% and a covariance with the market of .0150. The market has a standard deviation of 13.7%. What is the correlation of this stock with the market?

The following portfolio has an expected return of ________% and a beta of ________. Security \ Invested E(R) Beta A \ 40,000 9.00\% 1.05 B \ 34,000 10.50\% 1.33 C \ 26.000 11.80\% 1.22

Which one of the following announcements is most apt to cause the price of a firm's stock to increase?

A portfolio beta is computed as which one of the following?

The risk-free rate is 2.1%, the market rate is 11.5%, and the expected return on a stock is 17.32%. What is the beta of the stock?

What is the covariance of Security A to the market given the following information? Year R(a) R(m) 1 35 28 2 -30 -8 3 20 16

Laura has one risk-free asset and one risky stock in her portfolio. The risk-free asset has an expected return of 3.2%. The risky asset has a beta of 1.3 and an expected return of 14.9%. What is the expected return on the portfolio if the portfolio beta is .975?

A stock has an expected return of 15.10% and a beta of 1.30. What is the risk-free rate if the market rate is 13.1%?

Which one of the following is the best example of systematic risk?

Uptown Markets stock has a standard deviation of 16.8% and a covariance with the market of .02. The market has a standard deviation of 13.7%. What is the correlation of this stock with the market?

Which one of the following has the highest expected risk premium?

Which one of the following qualifies as diversifiable risk?

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Design Interior's stock has an expected return of 10% and a beta of 1.1. The market return is 9.5% and the risk-free rate is 2.0%. This stock is because the CAPM return for the stock is %.

The following portfolio has an expected return of % and a beta of . Security \ Invested E(R) Beta \ 30,000 16.20\% 1.12 \ 24,000 10.50\% 1.38 \ 26.000 11.80\% 1.33

The following portfolio has an expected return of % and a beta of . Security \ Invested E(R) Beta A \ 40,000 9.00\% 1.05 B \ 34,000 10.50\% 1.33 C \ 26.000 11.80\% 1.22