Exam 11: Systematic Risk and the Equity Risk Premium

Your portfolio contains $33,000 of CP Rail Stock,which has a beta of 1.3,and $41,000 of Lululemon stock,which has a beta of 1.05.What is the beta of your portfolio?

WestJet stock has a beta of 1.5.If the risk-free rate is 2.4%,and the expected market return is 10%,what is the expected return of WestJet stock,according to the CAPM?

The security market line is a graph of the expected return of a stock as a function of systematic risk (beta).

A stock market comprises 5000 shares of stock A and 2000 shares of stock B.Assume the share prices for stocks A and B are $20 and $35,respectively.What proportion of the market portfolio is comprised of stock A?

The volatility of Home Depot share prices is 30% and that of General Motors shares is 30%.When I hold both stocks in my portfolio and the stocks' returns have a correlation of 1,the overall volatility of returns of the portfolio is

Use the table for the question(s) below. Consider the following returns: -The volatility on Lowes' returns is closest to:

When the returns of two stocks are perfectly positively correlated,then

A stock market comprises 1000 shares of stock A and 3000 shares of stock B.The share prices for stocks A and B are $25 and $30,respectively.What is the capitalization of the market portfolio?

The amount of a stock's risk that is diversified away

Companies that sell household products and food have very little relation to the state of the economy because such basic needs do not go away.These stocks tend to have ________ betas.

Your investment portfolio contains 200 shares of RBC and 450 shares of Air Canada.The price of RBC is currently $92 per share,and the price of Air Canada is currently $11 per share.If you expect the return on RBC to be 6% in the next year,and the return on Air Canada to be 8%,what is the expected return for your portfolio?

Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations: -The volatility of a portfolio that is equally invested in Wal-Mart and Duke Energy is closest to:

Potash Corp stock has a beta of 1.1,while Tim Horton's stock has a beta of 1.4.The risk-free rate is 1.9%,and the expected return on a portfolio with 30% weight in Potash and the remainder in Tim Horton's is 9.76%.What is the market risk premium?

You have invested $10,000 in RBC stock and $21,000 in TD stock.If you expect the return on RBC to be 5% in the next year,and the return on TD to be 6.5%,what is the expected return for your portfolio?

You have invested $5,000 in RBC stock,$12,000 in TD stock,and $18,000 in WestJet stock.If you expect the return on RBC to be 4% in the next year,the return on TD to be 5%,and the return on WestJet to be 6%,what is the expected return for your portfolio?

Your portfolio contains $12,000 of BMO stock,which has a beta of 1.1,and $18,000 of Lululemon stock,which has a beta of 1.4.What is the beta of your portfolio?

A portfolio has three stocks - 100 shares of Yahoo (YHOO),200 Shares of General Motors (GM),and 50 shares of Standard and Poor's Index Fund (SPY).If the price of YHOO is $20,the price of GM is $20,and the price of SPY is $130,calculate the portfolio weight of YHOO and GM.

The S&P 500 index traditionally is a ________ portfolio of the 500 largest U.S.stocks.

Since total risk is greater than systematic risk,should standard deviation be always greater than beta?

Use the information for the question(s) below. Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a 6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange-traded fund (ETF) with a 12% expected return and a 20% volatility. -The volatility of your investment is closest to: