Exam 9: Characterizing Risk and Return

Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 10 percent and standard deviation of 19 percent. The average return and standard deviation of Idol Staff are 12 percent and 22 percent; and of Poker-R-Us are 11 percent and 25 percent.

Portfolio Weights If you own 600 shares of Alaska Corporation at $23.25, 450 shares of Best Company at $34.50, and 150 shares of Motor Company at $6.95, what are the portfolio weights of each stock?

This is the portion of total risk that is attributable to overall economic factors.

You have $10,000 to invest. You want to purchase shares of Alaska Air at $50.00, Best Buy at $50.00, and Ford Motor at $10.00. How many shares of each company should you purchase so that your portfolio consists of 25 percent Alaska Air, 40 percent Best Buy, and 35 percent Ford Motor? Report only whole stock shares.

The past five monthly returns for PG&E are 12.14 percent, -11.37 percent, 3.77 percent, 6.47 percent, and 3.58 percent. What is the average monthly return?

Which of the following statements is correct?

This is a measurement of the co-movement between two variables that ranges between -1 and +1.

Portfolio Weights An investor owns $2,000 of Adobe Systems stock, $4,000 of Dow Chemical, and $6,000 of Office Depot. What are the portfolio weights of each stock?

This is the dollar return characterized as a percentage of money invested.

Average Return The past five monthly returns for PG Company are 1.25 percent, -1.50 percent, 4.25 percent, 3.75 percent, and 1.98 percent. What is the average monthly return?

Standard Deviation The past five monthly returns for K and Company are 4.25 percent, 4.13 percent, -2.05 percent, 3.25 percent, and 7.75 percent. What is the standard deviation of these returns?

A stock has an expected return of 12% and a standard deviation of 20%. Long-term Treasury bonds have an expected return of 9% and a standard deviation of 15%. Given this data, which of the following statements is correct?

This is defined as the volatility of an investment, which includes firm specific risk as well as market risk.

Interest rates, inflation and economic growth are economic factors that are examples of ______________________.

Investment Return MedTech Corp stock was $50.95 per share at the end of last year. Since then, it paid a $0.45 per share dividend. The stock price is currently $62.50. If you owned 500 shares of MedTech, what was your percent return?

Which of the following describes what will occur as you randomly add stocks to your portfolio?

This is defined as a combination of investment assets held by an investor.

Modern portfolio theory is ________________.

The past five monthly returns for Kohl's are 2.55 percent, -8.62 percent, -14.44 percent, -1.52 percent, and 4.75 percent. What is the average monthly return?

Portfolio Return Year-to-date, Company O had earned a -2.10 percent return. During the same time period, Company V earned 8.00 percent and Company M earned 6.25 percent. If you have a portfolio made up of 40 percent Company O, 30 percent Company V, and 30 percent Company M, what is your portfolio return?